Board of Directors? Characteristics Impact on Capital Structure Decisions: Evidence from Top 50 Turnover Non- Financial Companies Listed on the Colombo Stock Exchange

The directors of a corporation are decided all corporate decisions at the board and those decisions are implemented after voting by shareholders. Thus board of directors and shareholders are the main decision makers of a corporation to formulating effective decisions. Thus, board of directors and shareholders are the two basic components of corporate governance system discussing characteristics of each component. However, this study is undertaken board of directors characteristics to examining its impact on one of the corporate finance decision is capital structure decisions. Thus, the aim of the study is to investigate the impact of board of directors characteristics on capital structure decisions of higher turnover non- financial companies in Sri Lanka. For the aim of the study, the study covers top 50 turnover non- financial companies ranking on LMD 100 (2014/2015) of Sri Lanka Business Magazine and sample period covers from year 2011 to 2015. The study has selected board size, board independence, CEO duality and board meeting to representing board of directors characteristics and debt to equity ratio is used as proxy of capital structure. The firm size and return on equity are used as controlling variables of the study. The study has applied the fixed effect panel regression model for the hypotheses testing. The findings of the study reveal that at higher turnover non- financial companies which have less total assets and higher profitability, board meeting has only significant and positive impact on capital structure decisions while number of directors, number of independent directors and separation of the role of chairman and CEO have no significant impact on capital structure decisions. It is supported to policy makers and regulators, and management body to enhance corporate governance system of non- financial companies in Sri Lanka.