Last modified: 2017-07-06
Abstract
This research aims to examine the influence of Board of Commissioners’ Composition on firms’ capital structure. Board of Commissioners’ Composition consists of 3 aspects: the proportion of independent commissioners, gender diversity of board, and board size. Capital structure is proxied by leverage, which are the ratio of total debt to total asset and the ratio of total long-term debt to total asset. The samples of this research are 232 non-financial firms listed in Indonesia Stock Exchange from 2012 to 2015, resulting in a total of 928 observations. The research uses quantitative method and panel data analysis. The results of this research show that the proportion of independent commissioners and board size have positive and significant influence on leverage, while gender diversity of board has negative and significant influence on leverage. Board of Commissioners serve as the supervisory board to ensure that the decision making regarding capital structure is made to maximize the firm value instead of managers’ private benefits. By considering the effective composition of Board of Commissioners, the impact of agency problem can be minimized and firms’ leverage levels can be higher.