Board of directors’ attributes and capital structure: evidence from Pakistani-listed non-financial firms

Abstract

PurposeThis study aims to explore the effect of the board of directors on the capital structure of listed non-financial firms on the Pakistan Stock Exchange (PSX).Design/methodology/approachUsing a panel data set of 208 financial Pakistani enterprises from 2015 to 2020, regression analysis is employed to examine the data utilizing independent variables such as board size, outside directors, directors' remuneration and managerial ownership to evaluate board characteristics and the total debt ratio for capital structure.FindingsThe results show that the board size positively impacts the debt ratio. However, outside directors, directors' remuneration and managerial ownership are negatively connected with the capital structure. The empirical findings indicate that corporate governance mechanisms play an important role in the capital structure decision of Pakistani non-financial companies.Practical implicationsThis research contributes to the literature by addressing the function of the board of directors in the governance of Pakistani enterprises.Originality/valueFew studies in Pakistan focus on board characteristics and those that do utilize different variables. This research aims to fill a critical gap by investigating the effect of the board of directors' attributes and the capital structure of the listed non-financial sector of Pakistan.