CORPORATE GOVERNANCE MECHANISM AND CAPITAL STRUCTURE OF NONFINANCIAL PAKISTANI FIRMS

This study seeks to examine the impact of corporate governance on capital structure of one hundred and five manufacturing firms, corresponding to 21 industries listed on Pakistan Stock Exchange from 2013 to 2018. For accomplishment of research objectives, data was collected from the audited annual reports of these firms. Corporate governance was measured through managerial ownership, board size, and board independence, whereas capital structure was calculated through debt to equity and debt to total asset. Pearson's correlation analysis and generalized method of moments regression model is used to test the hypotheses. The outcomes indicated that managerial ownership has positive and significant association with capital structure, however board size and board independence have negative and significant relationship with capital structure. The findings of this study support the previous studies and document that firms adhering code of corporate governance makes optimal capital structure decision that enhance firm solvency, mitigate risk and hence instills investors' confidence on financial market.