Corporate Governance Mechanisms and Capital Structure Decision of Textile Companies in Bangladesh

Abstract

Purpose: The purpose of this study is to examine the impact of corporate governance mechanisms on capital structure decisions of Textile Companies in Bangladesh. In particular, the paper examines the degree to which internal corporate governance mechanisms and an external corporate governance mechanism affect Bangladeshi textile firms’ capital structure.

Methodology of the Study: The paper uses a multiple regression analysis to examine the effect of corporate governance and capital structure for a sample of 10 Bangladeshi textile firms listed in DSE during period from 2011 to 2017.Board size, Board composition, Board meetings & Board ownership were used as corporate governance variables and Return on Assets (ROA) also used as control variable and debt ratio used as the measure of capital structure. This study also used different statistical tools like descriptive statistics, Pearson correlation and multiple regressions.

Findings: The findings indicate that the relationship of Debt Ratio with Board Size & Board Composition is positive and highly significant, a less significant or moderate positive relationship between Debt Ratio & Board Ownership, insignificant and negative relationship between Debt Ratio & Board Meetings and the Debt Ratio is negatively related to Return on Assets that is significant.CG mechanisms (Board Size & Board Ownership) are significantly and positively impact on firms Capital Structure/ Debt Ratio (DR) and (Board Composition & Board Meetings) are also positively impact on firms Capital Structure but that is statistically insignificant and Return on Assets is highly significant & negatively impact on firms Capital Structure/ Debt Ratio (DR) of Listed Textile Companies in Bangladesh.

[Keywords: Corporate Governance (CG), Capital Structure (CS), Debt Ratio (DR)]

DOI: 10.7176/JESD/10-20-02

Publication date:October 31^st 2019