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Corporate Governance and Capital Structure:Evidence from Taiwan SMEs

Author

Listed:
  • 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)

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.

Suggested Citation

  • Hsien-Chang Kuo & Lie-Huey Wang & Hui-Wen Liu, 2012. "Corporate Governance and Capital Structure:Evidence from Taiwan SMEs," Review of Economics & Finance, Better Advances Press, Canada, vol. 2, pages 43-58, August.
    • Handle: RePEc:bap:journl:120304
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    References listed on IDEAS

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    3. Mohamed Ali Azouzi, 2019. "Managerial Optimism Level, Board of Directors Efficiency and Debt Decision in Tunisian Companies," Economy, Asian Online Journal Publishing Group, vol. 6(2), pages 82-91.
    4. Omar Almania, 2017. "Board of Director Independence and Financial Leverage in the Absence of Taxes," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(4), pages 90-94, April.

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    More about this item

    Keywords

    Small and medium-sized enterprises (SMEs); Corporate governance; Capital structure;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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