DO CORPORATE GOVERNANCE, FIRM AGE, AND TOP MANAGEMENT EXPERIENCE DETERMINE THE CAPITAL STRUCTURE OF THE FIRM? AN EMPIRICAL STUDY

This study aims to explore the effect of corporate governance, firm age, and top management experience along with control variables on the capital structure of the firms using the panel data of non-financial listed firms in Pakistan from 2013 to 2017. Consistent with predictions of tradeoff theory, the empirical results show that firm size, age, and board independence are statistically significant and positively related to the leverage of the firm. Thus larger firms, older firms, and firms with greater board independence seem confident in getting the tax shield benefit of including more leverage in their capital structure. Furthermore, empirical outcomes reveal that top management experience, and profitability are significantly and negatively related to the leverage of Pakistani firms. This shows the presence of pecking order theory in determining the capital structure of the firm. Profitable firm, and experienced top management help firms to less rely on external financing. The significant negative relationship between leverage and board size is not supported by any theory.