The Impact of Corporate Governance on Financing Decision of Listed Firms in S&P EGX/ESG Index

Abstract

This study aims to investigate the relationship between corporate governance mechanisms and financing decision. Corporate governance mechanisms are represented by board size, board composition, CEO duality and firms’ weight in S&P EGX/ESG index. While financing decision is represented by leverage ratio (total debt to total assets ratio). The researcher used 30 non-financial firms which are listed in S&P EGX/ESG index, during the period from 2013 to 2018 and entered the index more than one time. The researcher used both qualitative and quantitative analysis to figure out this relationship. First, the researcher carried out descriptive analysis to highlight the main features of each variable. Second, correlation analysis to discover the association among explanatory variables as well as to find whether there is relationship between dependent variable and the independent variables. Third, Random effect regression analysis which examined the effect of corporate governance mechanisms on financing decision. The analysis showed that board size and firm’s weight in S&P EGX/ESG index have negative significant impact on debt ratio, while CEO duality and board composition have insignificant impact on debt ratio.