Corporate governance mechanisms and corporate debt: a study on non-financial firms listed in GCC stock exchanges

摘要

The purpose of this paper is to examine the impact of corporate governance on corporate debt. The corporate governance is measured by the board of directors and audit committee characteristics, the corporate debt is measured by debt ratio, long-term debt, and short-term debt ratios. Ordinary least-squares regressions are used to examine the relationships between the corporate debt of Gulf Cooperation Council nonfinancial companies as a dependent variable and seven corporate governance mechanisms as independent variables and four other firm-specific attributes, as control variables. The results indicate that three characteristics of the board, namely board independence, presence of female directors, and frequency of board meetings, are significantly associated with long-term debt ratio. This suggests that higher board independence and a higher number of women directors on the board would enhance the capability of the company to raise funds in the form of long-term debt. On the other hand, a higher frequency of board meetings is negatively associated with long-term debt and short-term debt ratios; indicating that a high number of annual board meetings are valued less by the Gulf Cooperation Council market. Also, the results show that the audit committee's independence is significantly associated with debt ratio. However, the size of the board and the size of the audit committee are insignificant in explaining the variations in the corporate debt.