The Relationship between Capital Structure and Ownership Structure: New Evidence from Jordanian Panel Data

Managerial Finance Journal, Vol. 34, No. 12, pp. 919-933, 2008

Posted: 20 Oct 2008 Last revised: 2 Jan 2011

See all articles by Basil Al‐Najjar

Basil Al‐Najjar

University of London - School of Business, Economics and Informatics

Peter Taylor

University of the West of England (UWE) - Bristol Business School

Date Written: April 1, 2007

Abstract

The study investigates the comparatively under-researched relationship between ownership structure and capital structure in an emerging market. It is also one of the first studies to apply both single and reduced form equation methods using a panel data approach. Furthermore, this is the first study of the interaction between institutional ownership and capital structure in Jordan where there are differences, as regards institutional and financial structures, relative to those in developed markets. The results demonstrate that Jordanian firms follow the same determinants of capital structure as occur in developed markets, namely: profitability, firm size, growth rate, market to book ratio, asset structure, and liquidity. In addition, institutional ownership structure is found to be determined by: assets structure, business risk, growth opportunities, and firm size. Finally, the results reveal that assets tangibility, firm size, growth opportunities and business risk are considered to be joint determinants of ownership structure and capital structure.

Keywords: capital structure, Ownership structure, institutional investors, panel data, simultaneous relationship

Suggested Citation

Al-Najjar, Basil and Taylor, Peter, The Relationship between Capital Structure and Ownership Structure: New Evidence from Jordanian Panel Data (April 1, 2007). Managerial Finance Journal, Vol. 34, No. 12, pp. 919-933, 2008 , Available at SSRN: https://ssrn.com/abstract=1285780

Basil Al-Najjar (Contact Author)

University of London - School of Business, Economics and Informatics ( email )

Malet Street
Bloomsbury
London, WC1E 7HX
United Kingdom

Peter Taylor

University of the West of England (UWE) - Bristol Business School ( email )

Frenchay Campus
Bristol, BS16 1QY
United Kingdom
0044 117 9653489 (Phone)

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