How Does Board Structure Characteristics Affect Capital Structure Decisions? Evidence from East African Stock Markets

Erick Lusekelo Mwambuli


This research examines the board structure characteristics and its effects on capital structure decisions in developing economies, East African stock markets. To achieve the objective of this research, we used a strongly balanced panel dataset of 320 observations (i.e. a sample of 32 non-financial listed firms in East African region from 2006-2015. Measures for capital structure decisions were short term debt ratio (STDR),long term debt ratio (LTDR) and total debt ratio (TDR) as dependent variables and explanatory (independent) variable was board structure characteristics measured by researcher-constructed index consisting of 10 board structure characteristics provisions; thus the board structure characteristics index (BSCI), furthermore, the effects of control variable such as firm size (SIZ),the level of economic development (GDP) and industry dummies were also examined. The panel corrected standard errors (PCSEs) regression model was employed for board structure characteristics and capital structure decisions to analyze the data. Our results indicate a statistically significant negative effect of board structure characteristics on capital structure decisions (except on short term debt where it’s insignificant) all models at 5% significance level. Our study is very innovative in both corporate finance and accounting literature and the practical implications because our study provides a first insight of the board structure characteristics and its effects on capital structure decisions for East African stock markets context. The study recommends to securities markets regulatory authorities in East African region such as East African member states securities regulatory authority (EASRA) and their respective countries securities markets regulatory authorities to stimulates new efforts towards better board structure provisions to listed firms in the regional bloc due to its statistically significant effects on financing behavior and future research can be extended after inclusion of both listed and unlisted firms.

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Copyright (c) 2018 Erick Lusekelo Mwambuli

Journal of Corporate Governance Research  ISSN 1948-4658


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