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Assistant Accountant at Mefic Capital company - Assignment Example
Author : ybeier
Finance & Accounting
Pages 20 (5020 words)
In this research paper, the discussion would be related to the capital structure decisions of the firms in Saudi Arabia and its association to the external and internal corporate governance system, which is generally considered to be one of the primary drivers in decisions related to capital structures. …
Various researches prior to this suggest that the capital structure is based on corporate governance decisions. Theories suggest that the size of the firm and profitability is negatively related to the debt equity ratio of the firm. These findings are in line with the agency theory, transaction cost theory or pecking order theory. It was found that the there is a negative relationship between debt equity ratio and market to book ration in case of assets, which also reveals that it is conflicting with the agency theory. On the other hand, in European countries tangibility has a positive relationship with the choice of capital structure and it is consistent with the agency theory. This study aims at discussing and analysing the capital structure with regards to corporate governance in Saudi Arabia. A quantitative analysis would be done to identify the relationship between capital structure and corporate governance, so as to identify an accurate association between these two major aspects in financial environment of Saudi Arabia. For this purpose a multiple regression analysis would be done for this study. A sample of 5-8 firms in Saudi Arabia in the securities market would be considered to conduct the study. ...