Board demographic characteristics and cost of debt decisions

• DOI: 10.5281/zenodo.8434487
• Publication Date: 2023-10-12
• Authors: Ibrahim Abdullahi; Onipe Adabenege Y...
• Keywords: 8. Economic growth; Board demographic characteristics, board gender, board independence, board meetings, board size, cost of debt, cost of equity, weighted cost of capital.

Onipe Adabenege Yahaya<br/>We adopt the Agency Theory (1976) as the theoretical foundation of this paper. We estimate the effects of board demographic characteristics on cost of capital of 133 listed firms on the Main Board of the Nigerian Exchange for a period of fifteen (15) years, covering 2008 to 2022. Board demographic characteristics considered in this article include, board size, board independence, board meetings, and board gender diversity, while cost of capital is measured by weighted average cost of capital (cost of debt and cost of equity). We use the Generalized Method of Moments to estimate the relationship between board demographic characteristics and weighted average cost of capital. Our regression results suggest that board meetings and cost of capital are positively and significantly related. Additionally, the remaining board demographic characteristics are not significant with cost of capital. The results are limited by sample size. Further research can increase the total sample of companies, or research period. Our results further show that the R2 is 62 percent. Further research is expected to be able to add other board demographic characteristics that may influence cost of capital decisions. There is also limitations in terms of data and methodology and possible omission of some variables. These findings remain consistent across a series of past results. The insights gleaned from this study will prove beneficial to scholars, management, regulators, and policy-makers.<br/>