Experience, Board Size, and Firm Capital Structure

Abstract

This empirical research aims to identify the effect of chief executive officer (CEO) experience and board size on a firm’s capital structure in three-top industries mining, agriculture, and consumer goods companies within year 2010–2016. This paper uses tradeoff theory to investigate top managers’ managerial experience and board size as elements of capital structure. The research result found that the experience from top manager positively influences to capital structure’s book value, therefore the increasing of managers’ experience years will be aligned with total and long termdebt of the company. Meanwhile, another independent variable, board size, negatively gives influence on the capital structure. Finally, our results are proved to be robust in both dependent variables, total market value and long-term debt proxies. Keywords—capital structure, corporate governance, executive experience, theory of trade-off