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The impact of corporate governance practices on dynamic adjustment of capital structure of companies in Ukraine

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  • Zheka Vitaliy

Abstract

Managers are risk averse and less willing than risk neutral shareholders to take on debt. Therefore in firms with poor corporate governance practices, where manager’s preferences dominate shareholders’ objectives, we shall see less debt and slower rates of adjustment of the capital structure. A goal of the paper is to investigate the impact of corporate governance (shareholder rights, transparency and supervisory board arrangements) on the pace of capital structure adjustment. A dataset includes all open joint-stock companies in Ukraine for years 2000-2007. It is found that typical firm in Ukraine completed the required leverage adjustment in about two years. The paper documents evidence that firms that practice better corporate governance benefited from the improved liquidity in 2000-2007 the most as they adjusted their financial structures at higher rates. The coefficients for shareholder rights, supervisory board structure and supervisory board procedure are found to be significant. Transparency variable is not found to have significant impact on speed of adjustment.

Suggested Citation

  • Zheka Vitaliy, 2010. "The impact of corporate governance practices on dynamic adjustment of capital structure of companies in Ukraine," EERC Working Paper Series 10/07e, EERC Research Network, Russia and CIS.
    • Handle: RePEc:eer:wpalle:10/07e
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    More about this item

    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
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies

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