The influencing power of apply and explain on capital structure

Nkwantabisa Agyeiwaa Owusu (), Falistus Raphael Hadjor () and Nelly Joel Tchuiendem ()
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Nkwantabisa Agyeiwaa Owusu: Zhongnan University of Economics and Law, Wuhan 430073, P. R. China
Falistus Raphael Hadjor: Hubei University of Technology, School of Economics and Business
Nelly Joel Tchuiendem: Zhongnan University of Economics and Law, Wuhan 430073, P. R. China

Technium Social Sciences Journal, 2021, vol. 24, issue 1, 348-361

Abstract: The paper investigated the suspension of Independent Non-Executive Directors (INEDs) stock options on corporate capital choices: Equity, retained earnings, long term borrowing and short term borrowing. The paper used a sample of 1250 non-financial Firm years from 2010 to 2019. The Ordinary Least Squares and the difference in difference method discovered that the firms' Leverage increased positively after the reform. In particular, the suspension of stock options impacts the high levels of long term borrowing in the "Apply and Explain" periods. The study submits that the suspension of stock options maximizes the independence of the INED on the executive Board and Subcommittees (Audit and Remuneration) to reduce the use of retained earnings and promotes the use of Long term debts in financing projects.

Keywords: Capital structure; Independent Executive Director; stock options; Apply and Explain (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:tec:journl:v:24:y:2021:i:1:p:348-361

DOI: 10.47577/tssj.v24i1.4820

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