A Research on Corporate Governance, Capital Structure, Default Risk, and Performance

Capital structure affects corporate performance and use of growth opportunities, which in turn is closely related to default risk. We are interested in corporate governance in that if it plays as a moderating factor in the determining corporate performance in the process capital structure and/or default risk affects corporate performance or operating efficiency. Our test is performed using data from non-financial companies listed in KRX (years 2008-2017). From our tests, we find that more debt significantly hurts operational performance (EBIT) away from financial leverage, but default risk explains EBIT positively and significantly. Also, we find that both debt and default risk significantly contribute to increasing total asset turnover, which is taken as an efficiency indicator. Finally, we report that default risk in connection with governance variables experience significantly reversed in signs of coefficients with total asset turnover as an efficiency indicator. So it is likely enough that governance variables contribute to moderating the role of capital structure and/or default risk in determining corporate efficiency.