Title:
The Path Analysis of Board Structure and Debt On Firm Performance of Listed Companies In the Stock Exchange of Thailand

Authors:
Wiwatwong Bunnun, Natthawat Thanasatchawat, Rattanawadee Sangmalee, Cheewan Thongsodsang, Athikun Polthongwiwat, Panadda Chanthakol, Porntepin Sooksaengprasit, Cholawat Prawalpatamakul and Praphatcharaporn Khamsri*, Thailand

Abstract:

Corporate governance through board structure (BS) is a crucial factor influencing financial decision-making and firm performance. The proportion of independent directors, as well as the strength and expertise of the board, can clearly determine debt repayment and capital policy. Board structure (BS) exerts a direct negative influence on the firm’s debt to equity ratio (DE), indicating that a strong board encourages cautious financial strategies and reduces reliance on debt financing. Conversely, the debt-to-equity ratio (DE) has a direct positive effect on firm performance (FP), suggesting that debt, when maintained at an optimal level, enhances financial efficiency. Furthermore, board structure also exhibits an indirect negative effect on firm performance through the firm’s debt to Equity ratio. This finding implies that when the board is excessively stringent, leading to an undue reduction in debt financing, the firm may lose investment opportunities and consequently diminish its capacity to generate returns. Therefore, firms should emphasize establishing an appropriate target for the debt-to-equity (DE) ratio and promoting diversity within the board in terms of experience and perspectives. Such measures would enable a balance between risk control and the pursuit of enhanced firm performance in the future.

DOI: https://doi.org/10.51505/IJEBMR.2025.91006