Corporate governance mechanisms and capital structure in a two-tier board system: The role of board gender diversity

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Abstract

This study sought to investigate the relationship between capital structure and corporate governance variables, with an emphasis on the moderating effect of gender diversity on the board on the relationship between capital structure and corporate governance mechanisms in a two-tier board structure (Indonesia). Utilizing a sample of 384 non-financial firms listed on the Indonesia Stock Exchange (IDX) from 2012 to 2021, this study generated 3,836 observations to evaluate hypotheses regarding the impact of the board of directors (BOD), board of commissioners (BOC), and the proportion of independent commissioners (PIC) on capital structure, as proxied by the debt-to-asset ratio (DAR) and long-term debt-to-asset ratio (LTD). Furthermore, it examined the moderating role of gender diversity in the relationship between corporate governance mechanisms and capital structure metrics. Panel data regression analysis, which comprised a fixed-effects (FE) model with clustered standard errors, was used to analyse the data. The study found no significant relationship between the corporate governance mechanisms and DAR. However, the BOD and the BOC significantly affect LTD. Incorporating gender diversity as a moderator revealed a significant enhancement in the linkage between corporate governance practices and financial leverage measures. Negative and notable associations were observed when moderated by gender diversity, indicating an amplified influence in the presence of female board members.

Keywords: Corporate Governance, Gender Diversity, Capital Structure, Indonesia

Authors’ individual contributions: Conceptualization — I.P., S.S., and T.F.M.; Methodology — T.H.U. and H.K.; Investigation — I.P., R.M., and R.I.; Data Curation — G.M.Z. and H.K.; Writing — Original Draft — S.S., T.F.M., and R.M.; Writing — Review & Editing — T.F.M., G.M.Z., and A.Z.; Supervision — S.S.; Project Administration — H.K.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G31, G34

Received: 19.12.2024
Revised: 06.03.2025; 17.04.2025
Accepted: 09.05.2025
Published online: 13.05.2025

How to cite this paper: Pahala, I., Suherman, S., Mahfirah, T. F., Mohidin, R., Indriani, R., Zairin, G. M., Utaminingtyas, T. H., Kurniawati, H., & Zikra, A. (2025). Corporate governance mechanisms and capital structure in a two-tier board system: The role of board gender diversity. Corporate Board: Role, Duties and Composition, 21(2), 18–30. https://doi.org/10.22495/cbv21i2art2