Corporate Governance and Its Impact On Capital Structure Of SMEs In Tanzania

ABSTRACT

Despite the good development and vital role played by SMEs in Tanzania the corporate governance of SMEs and its effects on capital structure has been a puzzle. Therefore, this study assesses the impact of corporate governance on capital structure of SMEs in Tanzania. The study examined board compositions, board size, number of non-executive directors and CEO duality on capital structure. The study adopted causal research design where simple random sampling was used to select 400 SMEs as ample of the study. The study utilized secondary data (2017-2019)for registered SMEs in BRELA. The data were analyzed using descriptive analysis, Generalized Method of Moment (GMM) Regression Analysis. The findings reveled that, board composition haspositive significant associations with short term debt, positive insignificant relationship on long term debtand negative insignificant associations with own capital. In addition board size had significant negative influence on equity and long term debt while positive relationship with short term debt. Furthermore non-executive directors had significant positive influence on short term debt while significant negative influence on long term debt and own capital. Moreover CEO duality had insignificant positive influence on long term debt, short term debt and own capital. The study recommends that much attention should be kept on setting appropriate board composition with suitable NEDs for ensuring optimum capital structure with least cost of capital while maximizing firm value while avoiding CEO duality.