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Corporate Governance and Capital Structure:Evidence from Taiwan SMEs

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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)

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    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.

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    File URL: http://www.bapress.ca/ref/ref-2012-3/Corporate%20Governance%20and%20Capital%20Structure---Evidence%20from%20Taiwan%20SMEs.pdf
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    Bibliographic Info

    Article provided by Better Advances Press, Canada in its journal Review of Economics & Finance.

    Volume (Year): 2 (2012)
    Issue (Month): (August)
    Pages: 43-58

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    Handle: RePEc:bap:journl:120304

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    Related research

    Keywords: Small and medium-sized enterprises (SMEs); Corporate governance; Capital structure;

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    References

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