Corporate Governance and Debt to Equity Ratio

7 Pages Posted: 23 May 2009

See all articles by Themistokles G. Lazarides

Themistokles G. Lazarides

University of Thessaly

Electra Pitoska

Technological Educational Institute (TEI) of West Macedonia - Applied Informatics in Business and Economy

Date Written: May 22, 2009


Capital structure, especially in the cases of the countries that belong in the Continental Europe system of Corporate Governance has a significant impact on the way that the firm is structured, organizationally, strategically and functionally. The decision to use the capital market or debt in order to obtain the necessary capital to finance firms’ operations is a critical factor for the formulation of corporate environment, because it contributes to the ownership concentration or diffusion and to corporate risk exposure level. Debt aggravation is measured by the ratio “Debt to Equity”. Panel data methodology is used. The hypothesis that are tested: a) is debt aggravation affected by the quality of corporate governance, the structure and composition of the Board of Directors, firm’s size, and other factors, b) are the factors that affect debt aggravation in Greece the same with the ones that are delineate in the literature for the Anglo-Saxon countries. Debt aggravation is statistically affected by performance, organizational structure and firm size. These findings are compatible with the literature. The innovative finding is that variables like Corporate Governance Index (CG), Mergers and Acquisitions (Merger), Major shareholder is the CEO (OWNCEO) and den dismissal or resignation of, executive, non executive (BDIS_P) and independent members of the Board of Directors are not statistical important. Corporate Governance does not seem to have any statistical important impact on capital structure and this conclusion is the opposite of the relevant studies of Shleifer and Vishny (1997) and Vilanova (2007). Greek firms seem to favor debt as a mean of finance, instead of capital-share issues.

Keywords: Corporate governance, Debt aggravation, Greece

JEL Classification: G32, G34, G39

Suggested Citation

Lazarides, Themistokles G. and Pitoska, Electra, Corporate Governance and Debt to Equity Ratio (May 22, 2009). Available at SSRN: or

Themistokles G. Lazarides (Contact Author)

University of Thessaly ( email )

Larisa, Greece
Larisa, 41110
00302410684323 (Phone)

Electra Pitoska

Technological Educational Institute (TEI) of West Macedonia - Applied Informatics in Business and Economy ( email )


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