Capital Structure, Corporate Governance, Equity Ownership and Their Impact on Firms’ Profitability and Effectiveness in the Energy Sector

Abstract

This paper aimed to research the interrelation between capital structure, corporate governance, equity ownership, and how they affect firm performance. The sample used consisted of 10 leading-energy-sector companies traded in the NYSE, most of which rank among the largest companies in the world by market capitalization, while the US-based ones are also Fortune 500 companies. Over the eleven-year period examined, from 2009 to 2019, a sampling frame of 110 data series was gathered and analyzed using panel data methodologies. The impact of the key parameters of capital structure, corporate governance, and equity ownership was tested using regression analysis (panel data method) on firm performance, measured by profitability. Our results support a significant relation among major capital structure and corporate governance parameters and firm performance, whereas no evidence was found to support a significant impact of equity ownership on the dependent variable found ascertained. Furthermore, our findings support that in our sample firms, pecking order and agency cost theories play an important role in the financing of these firms, while static trade and irrelevance theory find no support.

Keywords

• capital structure
• corporate governance
• firm performance
• equity ownership
• regression analysis (panel data method)
• capital structure theories