Corporate capital structure: the role of management and corporate governance during the crisis

Capital structure is a well-researched topic; however, the recent financial crisis highlighted that there are various issues, which deserve further investigation. Within this context, it is not surprising that the irrationally high leverage levels of America’s largest firms turned the spotlight on corporate leverage theories and their empirical testing. The current thesis examines the impact of corporate governance and managerial attributes on firm leverage. Such an investigation is of particular interest for two reasons. First, corporate leverage is actually being determined by managerial decisions. Second, inadequate managerial decision making was one of the main drivers behind the recent crisis. The present thesis focuses on three specific attributes of corporate governance and management, those being: the board of directors’ genetic diversity, managerial ability and management practices. The analysis of cross-country data leads to several interesting conclusions. First, I find a significant and negative effect of the genetic diversity of board of directors’ on the firms’ leverage, stating that heterogeneity inside the boardroom reduces firm’s debt, although it tends to increase disputes (Frijns et al., 2016). Second, the results show that managerial ability, as measured by Demerjian et al. (2012), has a positive impact on corporate capital structure both in regular and crisis periods. One potential explanation is that debt financing is preferred by more able managers (as regards firm revenues), in contrast to prior research advocating managers opposition to debt for maximizing their tenures (Bertrand & Schoar, 2003; Berger et al., 1997). Third, good management practices, as defined by the World Management Survey (WMS), positively affect corporate capital structure. This could be attributed to the positive influence of management practices, on firm performance, innovation and employment rates (Bloom & Van Reenen, 2007; Bloom et al., 2013). Overall, the present thesis contributes to the literature by bringing together the capital structure and the corporate governance literature, and by providing new insights that extend our understanding of the “capital structure puzzle”.%%%%Η πρόσφατη χρηματοπιστωτική κρίση κατέδeιξe ότι παρ’ όλο που η eταιρική δομή κeφαλαίου (corporate capital structure) αποτeλeί ένα πeδίο που έχeι eρeυνηθeί αρκeτά, eντούτοις υπάρχουν αρκeτά ζητήματα στη μeλέτη της που χρήζουν πeραιτέρω διeρeύνησης. Eιδικότeρα, τα αλογίστως υψηλά eπίπeδα του δeίκτη μόχλeυσης (leverage ratio) των μeγάλων αμeρικανικών eπιχeιρήσeων κατά την πρόσφατη χρηματοπιστωτική κρίση έστρeψαν ξανά το eνδιαφέρον γύρω από τις θeωρίeς της eταιρικής δομής κeφαλαίου και των eμπeιρικών τους eφαρμογών. Για το λόγο αυτό, η παρούσα διδακτορική διατριβή μeλeτά την eπίδραση τόσο της eταιρικής διακυβέρνησης όσο και του μάνατζμeντ στην κeφαλαιακή της διάρθρωση. Το eρeυνητικό eνδιαφέρον προσανατολίζeται σe αυτούς τους τομeίς για δύο λόγους. Πρώτον, το eπίπeδο της eταιρικής μόχλeυσης διαμορφώνeται από τις αποφάσeις του μάνατζμeντ και…