FINANCING DECISION AND CORPORATE GOVERNANCE

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ANDREI STANCULESCU ; DAN NICOLAE IVANESCU ; PETRE BREZEANU (2011)
  • Journal: INTERNATIONAL CONFERENCE Modern Approaches in Organisational Management and Economy 2011, volume 5, issue 1 November, pages 569-572
  • Subject: financial structure, financing decision, shareholder, manager, corporate governance, average weighted cost of capital, conflicts of interest.
    • jel: jel:G32
    acm: ComputerApplications_MISCELLANEOUS

This paper sustains the existence of a biunivocal link between a company’s financing decision and the corporate governance. On the one hand, the financing decision has an impact on corporate performance, which has been confirmed. According to the agency theory, the financing decision will contribute to solving interest conflicts between shareholders and managers. On the other hand, the corporate governance mechanism provides the proper contractual framework for attracting financing resources. The decision makers of profit-oriented organizations should take these correlations into account.
  • References (5)

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    2 Modigliani, F.; Miller, M.; “Corporate Income Taxes and the Cost of Capital: A Correction”, American Economic Review, 1963, pg. 433-443.

    3 Jensen, M. C.; Meckling, W. H.; “Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure”, Journal of Financial Economics, 1976, pg. 305-360.

    4 www.referenceforbusiness.com - Encyclopedia of Business.

    • Arping, S.; Sautner, Z.; “Corporate governance and leverage: Evidence from a natural experiment”, Finance Research Letters, 2010, pg. 127-134; • Jensen, M. C.; Meckling, W. H.; “Theory of the Firm: Managerial Behaviour, Agency Costs and Ownership Structure”, Journal of Financial Economics, 1976, pg. 305-360; • Modigliani, F.; Miller, M.; “Corporate Income Taxes and the Cost of Capital: A Correction”, American Economic Review, 1963, pg. 433-443; • Modigliani, F.; Miller, M.; “The Cost of Capital, Corporation Finance and the Theory of Investment”, American Economic Review, 1958, pg. 261-297; • Zwiebel, J.; “Dynamic capital structure under managerial entrenchment”, American Economic Review, 1996, pg. 1197-1215;  www.referenceforbusiness.com.

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