Analyzing the Impact of Board Characteristics on the Capital Structure of the Corporations Accepted in Tehran Stock Exchange

The basic philosophy behind creating a corporate leadership system is representation issues or the conflict of interests between the directors and shareholders. A number of mechanisms have been considered in the financial literature to reduce the problems of representation; one of the outstanding mechanisms is the corporate leadership system. This paper studies the relationship between some board characteristics, as one of the mechanisms of the corporate leadership, and the corporate capital structures. Therefore, 90 corporations accepted in Tehran Stock Exchange within 2002-2008 were selected as statistical sample. This research studies the size of board of directors, managing director’s dual responsibility, the percentage of board’s out-of-duty directors as ‘independent variables’ and debt ratio (capital structure criterion) as ‘dependent variable’. A multi-variable regression model was fitted using compositional data with the aim of testing the hypothesis. The results show that debt amount is increased in the corporations in which the functions of board chairman and managing director are not separated as well as in the corporations with less number of board members. There is no significant relationship between out-of-duty directors ratio and capital structure.