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The Cultural Diversity of the Board of Directors and Capital Structure

Author

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  • Karakoç, Bahadır

    (Samsun University)

  • Arcagök, Uğur

    (Mus Alparslan University)

Abstract

Cultural characteristics and personal values can play a significant role in financial decision-making process, alongside economic factors. This study contributes to the existing literature by investigating the impact of cross-cultural board members on capital structure decisions in publicly traded firms in Turkey. Using panel data methodology to analyze the capital structures of these firms between 2011 and 2020, we found that firms with at least 30% cross-cultural representation on their boards tend to borrow more than firms with less diverse boards. Similarly, firms with at least one cross-cultural board member borrow more than firms managed entirely by locals. These findings are significant in contributing to the understanding of the role of cultural diversity in financial decision-making and offer practical implications for firms aiming to optimize their capital structures. The results remain robust even after alternative regression specifications and other corporate financing decisions have been considered.

Suggested Citation

  • Karakoç, Bahadır & Arcagök, Uğur, 2023. "The Cultural Diversity of the Board of Directors and Capital Structure," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 14(3), pages 351-368, July.
    • Handle: RePEc:ris:buecrj:0642
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    More about this item

    Keywords

    Capital Structure; Cross-Culture; Board of Directors; Corporate Borrowing;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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