The Impact of Corporate Governance on the Capital Structure of Companies from the Energy Industry. The Case of Poland

Konrad Grabinski,Marcin Kedzior,Barbara Grabinska,Dorota Kedzior

doi:10.3390/en14217412

Abstract

The energy sector is expected to face fundamental challenges in the near future. On the one hand, it is experiencing a rapidly increasing demand for energy. At the same time, it is subject to the pressure of the climate policy due to environmental issues. For the same reason, the energy sector is forced to undertake costly investments to transform production from black to green energy. The issue of financing has become one of the key problems of the energy sector, especially in those countries in which energy production traditionally is based on fossil fuels, i.e., coal. The paper aims to investigate the impact of corporate governance on the capital structure of companies from the energy industry. We use three proxies of corporate governance quality: institutional investors, the board size, and state ownership and investigate their impact on capital structure. Our findings suggest that the latter two negatively impact debt levels. In our model, we control for financial factors and CEO personal characteristics. We use a Polish setting since transformational problems of the energy sector in Poland are especially visible. At the same time, energy companies in Poland are subject to the strict EU climate policy.

Highlights

These are the demands articulated from different groups of company stakeholders, and the effective mechanisms of corporate governance are crucial to ensure that these expectations are properly addressed
We aim to investigate the impact of corporate governance factors on the capital structure of companies from the energy industry
A similar situation occurs for our key corporate governance variables, TREASURY and INST_OWN, for which the correlation coefficient is very high (Table 3) and negative, suggesting that institutional investors tend to avoid state-owned companies

Summary

Introduction

In recent years the energy sector has experienced rapid growth, as the energy demand has dramatically increased. Still, it faced crushing criticism, as it is one of the biggest producers of greenhouse gas emissions and is the first to blame for causing global warming. Energy companies are expected to contribute to more sustainable growth by investing in renewable energies, reducing carbon emissions, addressing challenges with climate change and biodiversity protection [1]. This is strongly connected to the pressure they encounter to show how they contribute to society. These are the demands articulated from different groups of company stakeholders, and the effective mechanisms of corporate governance are crucial to ensure that these expectations are properly addressed

Objectives

Results

Conclusion