The Role of Investment, Financing and Dividend Decisions in Explaining Corporate Ownership Structure: Empirical Evidence from Spain

27 Pages Posted: 23 Oct 2006

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

Abstract

This paper analyses the determinants of ownership structure by focusing on the role played by investment, financing and dividend decisions. The use of the Generalised Method of Moments allows us to provide new evidence on this important corporate governance topic, since it controls for the endogeneity problem. Our most relevant findings show that: i) increases in debt lead insiders to limit the risk they bear by reducing their holdings; ii) monitoring by large outside owners substitutes for the disciplinary role of debt; and iii) both inside and outside owners are encouraged to increase their stakes in the firm in view of higher dividends. Our results hold after controlling for equity issues and share repurchases.

Suggested Citation

Pindado, Julio and de la Torre, Chabela, The Role of Investment, Financing and Dividend Decisions in Explaining Corporate Ownership Structure: Empirical Evidence from Spain. European Financial Management, Vol. 12, No. 5, pp. 661-687, November 2006. Available at SSRN: https://ssrn.com/abstract=939083 or http://dx.doi.org/10.1111/j.1468-036X.2006.00272.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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