ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

The Effect of Outsider Directors from Financial Institutes on Firms’ Debt Ratio

  • Seoung-Soon Cho Korea Maritime & Ocean University

Asian Tax Journal Vol. 15 No. 4 (2014), pp. 151-172

Abstract

Using the Korea stock listed firms over the period 2000 to 2008, this paper tests the effects offinancial outsider directors on firms’ capital structure, which is based on their supporting roles. This paper suggests the positive relationship between the financial outsider directors and firms’total debt ratio, regardless of classification of financial directors. Interestingly, the long－term debtratio is more increasing than others, which means that in Korea, financial outsider directors wouldhave an important role on the increase of the financial leverage. Collectively, our findings supportthe view that the financial outsider directors have a important role of supporting managers as wellas monitoring managers with respect to financial leverage policy in the Korean stock market.

Keywords

  • Corporate governance
  • outsider directors
  • financial outsider directors
  • capital structure
  • leverage policy

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