FINANCING DECISION AND CORPORATE GOVERNANCE

This paper sustains the existence of a biunivocal link between a company’s financing decision and the corporate governance. On the one hand, the financing decision has an impact on corporate performance, which has been confirmed. According to the agency theory, the financing decision will contribute to solving interest conflicts between shareholders and managers. On the other hand, the corporate governance mechanism provides the proper contractual framework for attracting financing resources. The decision makers of profit-oriented organizations should take these correlations into account. Keywords: financial structure, financing decision, shareholder, manager, corporate governance, average weighted cost of capital, conflicts of interest