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All Journal Journal of Indonesian Economy and Business
Wee-Yeap Lau
Department of Economics and Applied Statistics, Faculty of Business and Economics, Universiti Malaya
Decision Sciences, Operations Research & Management Economics, Econometrics & Finance

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Nexus between Financial Leverage and Board Independence of Public-Listed Firms: Is There Any Stylised Fact? Wai-Cheng Kok; Wee-Yeap Lau; Tien-Ming Yip
Journal of Indonesian Economy and Business Vol 38 No 1 (2023): January
Publisher : Faculty of Economics and Business, Universitas Gadjah Mada

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.22146/jieb.v38i1.4096

Abstract

Introduction/Main Objectives: This paper examines the relationship between financial leverage and board independence for firms listed on the Malaysian stock exchange. Research Methods: This research is conducted using sample of 265 non-financial firms listed on Bursa Malaysia from 2014 to 2018. Finding/Results: Our results show: first, board independence is essential in reducing firm leverage. However, board independence does not affect all firms equally. In particular, board independence has insignificant influences on the financial leverage of young or small firms. In contrast, the financial leverage of old or large firms is negatively associated with board independence. Second, the financial leverage of firms with low profitability is adversely affected by the presence of independent directors. However, the negative impact diminishes as the firms' profitability increases. Conclusion: These results indicate the importance of having independent directors for old, large, or low-profitability firms to reduce their financial leverage. These findings contribute to the stylised facts of the nexus between financial leverage and board independence.
Co-Authors Tien-Ming Yip Wai-Cheng Kok