Abstract
This study is undertaken with the purpose of investigating the impact of ownership structure and corporate governance on the capital structure of Pakistani listed firms from 2011-2014, feasible general least square is used to investigate the impact of ownership structure and corporate governance on capital structure of KSE 100 index firms. Explanatory variables include ownership concentration, managerial ownership, foreign ownership, institutional ownership, board size, board independence and CEO duality along with the three control variables namely firm size, firm profitability and liquidity. There is insignificant positive relationship between ownership concentration and capital structure, managerial ownership has a significant negative impact on debt ratio. Foreign ownership has also a significant negative impact on firm capital structure and institutional ownership has significant positive impact on capital structure. Board size is positively related to capital structure, board independence also positively related to firm’s debt ratio but CEO duality negatively related to the dependent variable, all these variables have significant impact on capital structure of Pakistani firms.
Highlights
Capital structure based on two factor including debt and equity and same is given in the balance sheet of companies
The main objective of this study is to find out the impact of ownership structure and corporate governance on capital structure of the Pakistani listed firms
This study uses ownership structure and corporate governance variables to determine the financial mix of Pakistani firms
Summary
Capital structure based on two factor including debt and equity and same is given in the balance sheet of companies. Current debt and long term debts are two important factor of capital structure. Financial soundness of company associated with the higher portion of owner equity in given capital structure. Issuance of long term debts and short term debts in a capital structure depends upon the company financial strategy. Common stock, preferred stock, undistributed profit and retain earning are the important element of owner equity. Lot of work has been done on capital theory by the many researchers but only few researchers focused to find out relationship between capital structure and corporate governance. Trustworthy relationship between shareholders, investor and lender can be created through good corporate governance. Continuous growth at organization level and country level associated with corporate governance
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