The Cultural Diversity of the Board of Directors and Capital Structure

Article Information
Journal: Business and Economics Research Journal
Title of Article: The Cultural Diversity of the Board of Directors and Capital Structure
Author(s): Bahadır Karakoç, Uğur Arcagök
Volume: 14
Number: 3
Year: 2023
Page: 351-368
ISSN: 2619-9491
DOI Number: 10.20409/berj.2023.421
Cultural characteristics and personal values can play a significant role in financial decision-making process, alongside economic factors. This study contributes to the existing literature by investigating the impact of cross-cultural board members on capital structure decisions in publicly traded firms in Turkey. Using panel data methodology to analyze the capital structures of these firms between 2011 and 2020, we found that firms with at least 30% cross-cultural representation on their boards tend to borrow more than firms with less diverse boards. Similarly, firms with at least one cross-cultural board member borrow more than firms managed entirely by locals. These findings are significant in contributing to the understanding of the role of cultural diversity in financial decision-making and offer practical implications for firms aiming to optimize their capital structures. The results remain robust even after alternative regression specifications and other corporate financing decisions have been considered.

Keywords: Capital Structure, Cross-Culture, Board of Directors, Corporate Borrowing

JEL Classification: G10, G20, N20, O16 Full Text