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The influencing power of apply and explain on capital structure

Author

Listed:
  • Nkwantabisa Agyeiwaa Owusu

    (Zhongnan University of Economics and Law, Wuhan 430073, P. R. China)

  • Falistus Raphael Hadjor

    (Hubei University of Technology, School of Economics and Business)

  • Nelly Joel Tchuiendem

    (Zhongnan University of Economics and Law, Wuhan 430073, P. R. China)

Abstract

The paper investigated the suspension of Independent Non-Executive Directors (INEDs) stock options on corporate capital choices: Equity, retained earnings, long term borrowing and short term borrowing. The paper used a sample of 1250 non-financial Firm years from 2010 to 2019. The Ordinary Least Squares and the difference in difference method discovered that the firms' Leverage increased positively after the reform. In particular, the suspension of stock options impacts the high levels of long term borrowing in the "Apply and Explain" periods. The study submits that the suspension of stock options maximizes the independence of the INED on the executive Board and Subcommittees (Audit and Remuneration) to reduce the use of retained earnings and promotes the use of Long term debts in financing projects.

Suggested Citation

  • Nkwantabisa Agyeiwaa Owusu & Falistus Raphael Hadjor & Nelly Joel Tchuiendem, 2021. "The influencing power of apply and explain on capital structure," Technium Social Sciences Journal, Technium Science, vol. 24(1), pages 348-361, October.
    • Handle: RePEc:tec:journl:v:24:y:2021:i:1:p:348-361
    DOI: 10.47577/tssj.v24i1.4820
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    References listed on IDEAS

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    More about this item

    Keywords

    Capital structure; Independent Executive Director; stock options; Apply and Explain;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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