Capital Structure: New Evidence from the Ownership Structure

14 Pages Posted: 12 Jun 2011

See all articles by Julio Pindado

Julio Pindado

University of Salamanca - Administration and Business Economics

Chabela de la Torre

University of Salamanca - Administration and Business Economics

Date Written: June 2011

Abstract

This paper provides theory and empirical evidence supporting a complementary perspective on capital structure based on corporate ownership structure. According to our ownership view, capital structure is partly determined by the incentives and the goals of those who are in control of the firm. Our results strongly support this view. As a consequence of managerial entrenchment and rent expropriation phenomena, self‐interested agents (entrenched managers and controlling owners) chose the capital structure most appropriate for their own best interest. Additionally, we find evidence of an interaction effect between managerial ownership and ownership concentration, in particular, the larger debt increments promoted by outside owners when managers are entrenched.

Suggested Citation

Pindado, Julio and de la Torre, Chabela, Capital Structure: New Evidence from the Ownership Structure (June 2011). International Review of Finance, Vol. 11, No. 2, pp. 213-226, 2011. Available at SSRN: https://ssrn.com/abstract=1861763 or http://dx.doi.org/10.1111/j.1468-2443.2010.01115.x

Julio Pindado (Contact Author)

University of Salamanca - Administration and Business Economics ( email )

Campus Miguel de Unamuno
Salamanca, ES-37007
Spain
+34 923 294640 (Phone)
+34 923 294715 (Fax)

Chabela De la Torre

University of Salamanca - Administration and Business Economics ( email )

Campus Miguel de Unamuno
Salamanca, ES-37007
Spain

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