The influence of board characteristics on the capital structure of top 100 Malaysian public listed companies / Soofiyah Diana Sanadi

The board characteristics are one of the mechanisms in enhancing corporate governance. These characteristics are also considered as major corporate controls. Malaysian Code of Corporate Governance (MCCG) acts as a guideline for the public listed companies to follow even though the recommendations were not necessary to be complied. Prior studies provide mixed result on the relationship between board characteristics and firm’s capital structure. Thus, the aim of this study is to examine the influences of board characteristics on the capital structure of selected Malaysian public listed companies. In this study, board characteristics are comprised of board leadership structure, board committee, board size, board meeting and board composition. Data were collected within a period of past 5 years from 2012 to 2016 with a total sample data of 175 that was taken from companies’ annual report. The level of capital structure was measured using debt ratio since most of the prior researchers used debt ratio to determine the relationship between board characteristics and firm’s capital structure. Multicollinearity regression test was used to test the relationship of both variables. The result showed that board committee and board composition has a significant and positive relationship with firm’s capital structure. On the other hand, board leadership and board size are negatively related to the firm’s capital structure. Board meeting is also not significantly related with firm’s leverage. Overall, this study indicates that board characteristics has no significant effect on the firm’s capital structure as there are also other factors that plays an important roles in affecting the firm’s capital structure.