Board Monitoring and Capital Structure Dynamics: Evidence from Bank-Based Economies

We examine the impact of board characteristics on the speed of adjustment and the capital structure dynamics of firms in bank-based economies. Using 3927 firm-year observations over a 10-year (2009-2019), we find that board characteristic influences firms' speed of adjustment in a bank-based (stakeholder-oriented) system. We also find some evidence that board characteristics have varying impacts on the capital structure of Japanese, French and German firms. We conclude that firms' capital structure reflects the corporate governance environment they operate. Our results are robust to accounting for endogeneity and alternative leverage measure.