The Moderating Role of Cost of Debt in The Effect of CEO-Board Social Ties on the Capital Structure Reversibility: An Analysis of Agency Theory

According to agency theory, CEO-Board social ties can lead to the reduction of board supervision, according to which, the CEO may prioritize his interests when making strategic investment decisions. Therefore, the current research aims to investigate the effect of the CEO-Board social ties on capital structure reversibility with the moderating role of the cost of debt. The research hypothesis was tested based on a statistical sample consisting of 112 companies from 2011 to 2020 using multivariate regression based on combined data. The findings of the research show that according to the agency theory, the CEO-Board social ties have a negative and significant effect on capital structure reversibility. Also, according to the findings of the research, by the agency theory, the cost of debt intensifies the effect of the CEO-Board social ties on capital structure reversibility. The results indicate that when the CEO-Board social ties increase, the return period of the capital structure decreases. Also, in companies with high cost of debt, with the increase in the CEO-Board social ties, the return period of the capital structure is further reduced.