The Effect of Corporate Governance on Capital Structure Decisions – A Case of Saudi Arabian Banking Sector

Nasir Ali (), Najeeb Muhammad Nasir () and Saqlain Latif Satti ()
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Nasir Ali: King Saud University
Najeeb Muhammad Nasir: King Saud University
Saqlain Latif Satti: King Saud University

Acta Universitatis Danubius. OEconomica, 2014, issue 10(2), 51-60

Abstract: The aim of this empirical study is to analyse the impact of Corporate Governance on Capital Structure Decisions in Saudi Arabian commercial banking sector. The components of corporate governance whose impact has been analysed on the capital structure are board size, independence of directors, ownership structure, ownership of management, board meetings. Multiple regression analysis, Correlation matrix and Descriptive Statistics is used to assess the relationship among corporate governance components and capital structure of Saudi commercial banks for the years 2010 and 2011. The results shows that ownership structure and board size are positively correlated which is coherent with most of the previous studies. Managerial ownership and board independence are negatively correlated and board meeting held in a year is also negatively correlated but is statistically insignificant. Moreover the study found that on average the Saudi banks uses 68 % debt capital. The research study is supposed to facilitate regulatory authorities like CMA for improving the implementation of rules and regulations in order to make corporate governance tools work more efficiently in the Kingdom of Saudi Arabia. The research study evaluates the effects of corporate governance components on capital structure decisions of Saudi commercial banks.

Keywords: Commercial Banks; Capital Structure Decisions; Corporate Governance (search for similar items in EconPapers)
Date: 2014
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