The moderating effect of ownership structure on the relationship between corporate governance effectiveness and cost of debt

Abstract

Cost of debt provides signals not only concerning how firms are financed but also pertaining to the ability of managers to improve firms’ bottom line-income statement item. Research has shown that good corporate governance practice can lead to an optimum cost of debt. While there has been research examining corporate governance practices and cost of debt in other contexts, there is however a general lack of research that investigate this issue within the Arab or Middle East context, particularly in the setting of the Sultanate of Oman. This study contains four types of investigations. First it examines whether the cost of debt is influenced by the board of directors and audit committee effectiveness. Second, it investigates whether family ownership moderates the relationship between board of director and audit committee effectiveness and cost of debt. Third, it inspects whether government ownership moderates the relationship between the board of director and audit committee effectiveness and cost of debt.