Ceo Duality And Capital Structure Case Study

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1.2.4 CEO Duality and capital structure According to Brenni (2014) CEO duality describes a situation where the CEO is also the board chairperson. However, Bodaghi and Ahmadpour (2010) argued that CEO duality does not significantly influence corporate financing behavior. According to Butt and Hasan (2009) firms financing conduct is not significantly linked to CEO duality, these results were consistent with those of Heng et al. (2012) who suggested no significant association between the CEO duality and capital structure. Their study revealed that about 90% of the firm’s studied had distinctive roles of Chief Executive Officer and Chairman which is consistent with the Malaysian code on corporate governance’s recommendation and could explain the reason why the CEO duality has no significant effect on leading…show more content…
They established a significant negative linkage between firm performance as represented by ROA and leverage. This is because profitable firms prefer to use their internally generated funds first should they need funds, debt is their last resort. These results were consistent with Purang et al., (2016) findings that there is significant negative linkage between return on assets (ROA) and firm leverage as represented by debt ratio and debt equity ratio. 1.2.7 Firm size and capital structure Butt and Hasan (2009) hypothesized a significant positive linkage between DE ratio and the size of a firm. Kuo and Wang (2012) affirmed a positive linkage between the size of a firm and leverage as represented by debt ratio .In addition, Purag et al., (2016) hypothesized a significant positive linkage between the size of a firm and capital structure of the firm. This can be explained by that big firms have the security to obtain debt easily than small firms. This was also because financial institutions trust bigger firms with funds as they are already established and have a history of success. 1.3
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