The Effect of Enterprise Risk Management on Capital Structure Agility: The Role of Board Structure

The current study investigates the effect of enterprise risk management (ERM) on the agility of capital structure (CSA) by considering the role of the board’s characteristics. The data from 124 publicly listed companies on the Tehran Stock Exchange (TSE) between 2013 and 2022 were collected, and hypotheses were tested using a multivariable regression model. Flannery & Rang's (2006) model, and Aprelia et al. (2022) model were used to evaluate CSA and ERM, respectively. The results provide evidence of the usefulness of employing ERM in adjusting capital structure toward the optimal state, and that ERM mechanisms significantly enhance this agility. Additionally, the board's independence strengthens the impact of using ERM on the CSA. Therefore, it is suggested that companies by forming and strengthening the position of the risk committee could achieve the optimal capital structure and minimize capital costs. Moreover, independent managers will increase the agility of the movement toward the optimal state.

The Effect of Enterprise Risk Management on Capital Structure Agility: The Role of Board Structure Keywords:

Capital structure agility , Optimal Capital Structure , risk management , board characteristic structure