Corporate Governance and the Financial Leverage: Evidence from Jordan.

Abstract

Does corporate governance play a role in determining the capital structure of the firms? this study has been  examined the relationship between corporate governance and the use of debt financing. The study shown that funds and institutional holdings has a negative and significant impact on leverage, suggesting that financial leverage degree decreased with the increased monitoring power of funds and institutional stockholdings. On the other hand, the holdings of large owners have a positive and significant relationship with leverage. In this study we present a number of explanations by viewing that entrenched managers may obtain a better access to debt market and then they can finance with extra debt this possibly is consider as an outcome of conservative investments policy they used. Our findings could be a helpful and practical for not only investors and financial managers, it could be useful also for financial consultants.

Keywords: Corporate governance; financial leverage; funds holdings, capital structure.