The Impact of Ownership Structure on Corporate Debt Policy

Download or read book The Impact of Ownership Structure on Corporate Debt Policy written by James N. Rimbey and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the influence of agency costs and ownership concentration on the capital structure of the firm. Of particular interest is the composition of equity ownership as a determinant of overall capital structure and the dynamic adjustment of capital structure to changes in the equity ownership. Time-series cross-sectional analysis and a set of refined explanatory variables are employed to better investigate changes in managerial behavior through time as well as across firms. Results indicate that the distribution of equity ownership is important in explaining overall capital structure and that managers do reduce the level of debt as their own wealth is increasingly tied to the firm. It is shown that institutional ownership and share dispersion cause adjustments in capital structure through time, as do other agency-related factors. It is also noted that the time-series component is important in resolving the conflicting results reported in prior research.