Corporate governance and the choice between bank debt and public debt
ISSN: 1472-0701
Article publication date: 8 August 2023
Issue publication date: 5 January 2024
Abstract
Purpose
This study aims to examine the impact of board characteristics on debt choice.
Design/methodology/approach
The sample comprises of unique nonfinancial firms listed in the FTSE 350 over the period 2011–2018. This study uses Tobit and OLS regressions to check the impact of board characteristics on debt choice. The results are robust to the battery of robust checks.
Findings
This study finds that board size and board independence are positively associated with public debt. However, CEO duality and board meetings frequency are inversely associated with public debt. Overall, the findings are consistent with the “financial intermediation theory” that the firms with weak governance rely on bank financing, and firms with better corporate governance go for public debt.
Research limitations/implications
This study offers significant insights for investors and policymakers.
Originality/value
This study offers new insights regarding the role of board characteristics in firms’ debt choice by showing the significant impact of board characteristics on debt choice. The findings indicate that the board’s efficient internal monitoring may substitute external monitoring by the bank.
Keywords
Acknowledgements
Erratum: It has come to the attention of the publisher that the article Ahmed, I., Mehmood, O., Ghafoor, Z., Jamil, S.H. and Majeed, A. (2023), “Corporate governance and the choice between bank debt and public debt”, Corporate Governance, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/CG-01-2022-0028, was published with an error in the affiliation Ahmed, I., Mehmood, O., Ghafoor, Z., Jamil, S.H, this should Faculty of Management Sciences – Riphah International University, Islamabad, Pakistan, and Majeed, A. Department of Commerce, Fatima Jinnah Women University, Rawalpindi Pakistan. This has now been corrected in the online version. The publisher sincerely apologises for this error and for any inconvenience caused.
Citation
Ahmed, I., Mehmood, O., Ghafoor, Z., Jamil, S.H. and Majeed, A. (2024), "Corporate governance and the choice between bank debt and public debt", Corporate Governance, Vol. 24 No. 1, pp. 59-80. https://doi.org/10.1108/CG-01-2022-0028
Publisher
:Emerald Publishing Limited
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