Abstract
The study explores the relationship between ownership structure and corporate governance on capital structure of some listed manufacturing companies in Ghana Stock Exchange. This study was motivated by the fact that although the concept of corporate governance has been researched on in literature, no clear evidence exist of its study in Ghana relating to ownership structure on leverage. The study covers the period 2007 to 2011 for which firm level data for eight (8) randomly selected manufacturing listed companies from Ghana Stock Exchange has been examined by using descriptive, correlation and multivariate regression analysis. Corporate governance variables employed are board size, board composition, and CEO/Chair duality. Impact of ownership has also been examined by using managerial and institutional shareholding. Similarly influence of controlled variables like firm size and profitability on firms’ financing mechanism is also investigated. Results reveal that Board Size, Board Composition, Institutional and Managerial shareholding is significantly correlated with leverage ratio positively, whereas it is negatively influenced by CEO/Chair duality. However, firm size and return on assets are found to have a positive and negative significant effect on capital structure respectively. Therefore results suggest that corporate governance and ownership structure play important role in firm’s capital mix determination.
Highlights
Corporate governance (CG) has become one of the most discussed topics in business administration due to balance sheet manipulations or even collapse of some public corporations like Enron, WorldCom, etc
Capital structure decisions can be affected by various factors, among which corporate governance and ownership structure constitutes important element
This paper empirically examined the relationship between corporate governance, ownership structure and capital structure for Ghanaian listed manufacturing companies for the period 2007-2011 by using multivariate regression analysis
Summary
Corporate governance (CG) has become one of the most discussed topics in business administration due to balance sheet manipulations or even collapse of some public corporations like Enron, WorldCom, etc. Corporate Governance enlarged up prevailing debate on shareholder value management (Arnsfeld & Growe, 2006). It deals with management and the supervisory system of companies and represents the legal and factual regulation framework for the interaction of management, board and stakeholders (Bassen & Zöllner, 2007). Good corporate governance practices may have significant influence on the strategic decisions of a company, example, external financing, cost of financing, etc that are taken at board level. Corporate governance variables like size of board, composition of board, board skills and Chief Executive Officer (CEO)/Chair duality may have direct impact on capital structure or leverage decisions
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