The effect of corporate governance on the capital structure of commercial banks listed on the Malta Stock Exchange

Abstract

The objective of this empirical research is to investigate the impact of corporate governance on capital structure decisions in the Maltese commercial banking sector that are listed on the Malta Stock exchange. Following the collapse of major institutions such as Enron, it was proven that a strong corporate governance structure is crucial for any firm. If all firms and institutions supported the use of excellent corporate governance structures, stakeholders will have increased confidence and protection, whilst the firms will also be safer from collapse. This dissertation tries to tackle issues with corporate governance and provide readers with more information on the topic in order for the financial industry in Malta to better in this regard by being more knowledgeable on the subject. The parameters that will be used as corporate governance variables are: Ownership of management, leadership structure, board size and independence, and board meetings. On the other hand debt ratio will be used as the measure of capital structure. Qualitative research will be used mainly via the assistance of semi-structured interviews with the respective Maltese Listed banks. These interviews will be used to evaluate the levels of corporate governance found in banks listed on the MSE and also to assess the relationship among corporate governance components and capital structure of Maltese banks for the year 2018 to 2019. It can be concluded that Banks in Malta do have structures of corporate governance in place. Also, another conclusion from this dissertation is that corporate governance does indeed have an effect on the capital structure of banks.