The effects of board structure characteristics on capital structure: An application on companies registered to Borsa Istanbul

The study aims to examine the board structure effects on the decisions of capital structure for publicly listed manufacturing companies in Turkey. The prior studies in Turkey mainly focused on the relationships between the attributes, structure, and diversity of the board of directors and firms' financial performances. Little has been done on the association between board structure characteristics and financing decisions. For this reason, examining the links between corporate governance features and companies' financing decisions is of great importance as it will contribute to the extant corporate governance and financing decisions literature. The necessary research data were collected from companies' annual financial, operational, and corporate governance compliance reports from 2011 to 2019. The board structure data was hand collected from firms' operational reports, Public Disclosure Platform (KAP) database and the respective companies' websites. Accounting and financial variables were also collected from Finnet, Borsa Istanbul's licensed data disseminator. The collected data were analyzed in two stages; in the preliminary stage, descriptive analysis and econometric analysis techniques were carried out in the second stage. Due to the behavior of the data, this study has employed a panel econometric regression model. Consequently, appropriate tests were carried out to select the most suitable model of the study. According to the Hausman specification test, the Fixed Effects model is preferred to test the research hypotheses. Moreover, the FE model is selected to overcome the concern of omitted variables bias. The finding reveals that board independence has a significant positive effect on the leverage ratio of listed companies in Turkey. Boards with more independent directors encourage more debt financing in companies' capital structure because company managers face intense scrutiny and are therefore pushed to employ more leverage in the company's capital structure. The board meetings frequency is negatively and significantly influences the firm capital structure decision. Thus, it has been confirmed that Turkish companies, which frequently hold board meetings, will reduce their external debt financing. Conversely, top management compensation is significantly affects the capital structure decisions of Turkish companies. The study found that gender diversity on the boards has insignificant effects on the capital structure choices of Turkish listed companies. The control variables' results primarily follow the prominent capital structure theory, called the pecking order theory. Keywords: Board structure, Capital structure, Corporate governance, Panel data, Turkey