CORPORATE GOVERNANCE AND THE FIRM’S CAPITAL STRUCTURE (CASE STUDY OF LISTED COMPANIES IN TEXTILE INDUSTRY OF PAKISTAN)

https://doi.org/10.5281/zenodo.18297707

Abstract

Corporate governance is an evolving area of research in management. Hence, study in hand has observed the relationship of corporate governance with that of the capital structure in listed organizations of Textile Industry in Pakistan Stock Exchange. Related literature is reviewed to extract results of earlier studies regarding corporate governance. Moreover, related variables have been studied and analyzed through the annual reports of selected firms for five years. Corporate governance is explained by board size, independent members on companies’ board non-executive members on the companies’ board and chairman duality. Capital structure is explained through debt-equity ratio. Correlation of independent variables including size of board (total number of the directors on companies’ board), non-executive directors on board and directors independent on board with the dependent variable Debt Equity Ratio was calculated through statistical software SPSS. Significant correlation was observed between percentage of debt equity ratio with independent directors on company’s board and non-executive directors on company’s board. However, correlation was not found significant in between debt-equity ratio and board size of the listed textile companies in Pakistan Stock Exchange. It is apparent from the said study that corporate governance observance is still at its initial stage in the listed companies of Pakistan and require considerable time and policy implementations to meet the international corporate governance practices.