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THE RELATION BETWEEN FINANCIAL MANAGEMENT AND CORPORATE GOVERNANCE: ANALYTICAL APPROACH AT THE LEVEL OF THE RISK MANAGEMENT STRATEGIES

Petre Brezeanu () and Mohammed Subhi AL Essawi
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Mohammed Subhi AL Essawi: Academy of Economic Studies, Bucharest, Piaţa Romană no. 6, Bucharest, Romania

Management & Marketing, 2011, vol. 6, issue 1

Abstract: This paper presents the contribution of corporate governance to the risk management system of an enterprise from the perspective of the financial leverage. We assume that companies with a strong corporate governance framework are likely to enhance the optimality of their financial structure. We perform a literature overview on this topic, in parallel with an empirical approach that brings forth the effect of corporate governance framework on the company financial structure, with a special focus on leverage. The empirical approach is developed using the Ordinary Least Squares methodology; the results of the research reflect a strong impact of corporate governance on the company financial structure. We construct this finding from the perspective of the beneficial effects of an enhanced corporate governance framework which reduces agency costs, conferring to the company more credibility in the eyes of creditors.

Keywords: capital structure; financial management; governance; leverage; risk management (search for similar items in EconPapers)
Date: 2011
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