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Purpose: Our paper aims to contribute to prior research by examining the relation between corporate governance mechanisms and corporate capital structure in one of the emerging economies, United Arab of Emirates (UAE). In particular, we examine the degree to which internal corporate governance mechanisms and an external corporate governance mechanism affect UAE firms ’ financing decisions. Design/methodology/approach: We use a multiple regression analysis to examine the association between corporate governance and capital structure for a sample of 71 UAE firms listed either in the Dubai financial market or the Abu Dhabi securities market during 2006. Findings: We find that institutional investors have a negative impact on debt-to-equity ratio. This result does not support the ‘active monitoring hypotheses where institutional investors are expected to exercise their voting rights effectively in order to prevent managers from reducing their ‘employment risk ’ at the expense of the interests of shareholders. We find no significant association between our measures of the other corporate governance mechanisms and debt-to-equity ratio. We also find that dividend policy is negatively associated with debt-to-equity ratio, while firms’ size is positively associated with debt-to-equity ratio. Research implications: Our study has policy implications for both the UAE stock market and for other emerging economies. Originality: To the best of our knowledge, there is no study has yet empirically examined the effect of the corporate governance mechanisms on capital structure in UAE or Middle Eastern countries