CORPORATE GOVERNANCE AND FINANCING CHOICES OF FIRMS: A PANEL DATA ANALYSIS

Authors


  • We are very much grateful to the anonymous referees for their invaluable comments. The usual caveat for responsibility applies.

  • The authors are grateful to Africagrowth Research, South Africa, for funding this research.

University of Stellenbosch Graduate School of Business, and University of Ghana Business School, Ghana. Contact details: Post Office Box LG 78, Legon, Accra, Ghana. Tel: +233 21 501594; Fax: +233 21 500024; Cellular Phone: +233 244 234886. Email address: acoleman@ug.edu.gh or acoleman@usb.sun.ac.za

Abstract

We examine how corporate governance indicators such as board size, board composition and CEO duality impact on financing decisions of firms. Panel data covering the five year period 1999-2003 from forty-seven (47) listed firms on the Nairobi Stock Exchange (NSE) was used. Analysis was done within the Random-effects GLS regression framework. Findings of the study indicate that firms with larger board sizes employ more debt irrespective of the maturity period and also the independence of a board negatively and significantly correlates with short-term debts. Again, when a CEO doubles as board chairperson, less debt is employed. Thus, the study reaffirms the notion that the governance structure of a firm affects its financing choices.

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