Corporate Governance and Capital Structure:Evidence from Taiwan SMEs

Hsien-Chang Kuo (), Lie-Huey Wang () and Hui-Wen Liu ()
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Hsien-Chang Kuo: Department of Banking and Financing, Takming University of Science and Technology
Lie-Huey Wang: Department of Finance, Ming Chuan University
Hui-Wen Liu: Department of Banking and Finance, National Chi Nan University

Review of Economics & Finance, 2012, vol. 2, 43-58

Abstract: This study examines the effects of corporate governance on capital structure, using the data of 145 small and medium-sized enterprises (SMEs) listed on the Taiwan Stock Exchange over the period 2000-2007. The results show that, when there is a high divergence between shareholdings and director seats, conventional industries prefer to use long-term debt financing, while high-tech industries prefer the opposite. For large firms, block-holders and independent directors prefer lower long-term debt financing, but family shareholders and managerial directors prefer lower short-term debt financing. We also find that family shareholding ratio and family directors are the two most important factors that affect the SMEs¡¯ debt ratio. The higher the family shareholding ratio is, the more short-term debt financing will be. However, family directors can reduce the incidence of using short-term debt to support long-term financial needs.

Keywords: Small and medium-sized enterprises (SMEs); Corporate governance; Capital structure (search for similar items in EconPapers)
JEL-codes: C23 G32 G34 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (5)

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