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The nonlinear effect of foreign ownership on capital structure in Japan: A panel threshold analysis

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  • Zeitun, Rami
  • Goaied, Mohamed

Abstract

This study scrutinizes the nonlinear relationship between foreign ownership and corporate leverage decisions by applying a panel threshold model to a sample that comprises a balanced panel data set of 1027 Japanese firms. Moreover, this study investigates whether a threshold for the level of foreign ownership moderates the effect of determinants on capital structure. The empirical findings support the existence of a threshold effect for foreign ownership on corporate capital structure and its determinants. Furthermore, our findings have managerial implications for foreign investors with a high level of ownership in that they should mainly use liquidity, profitability, and growth to reduce leverage.

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  • Zeitun, Rami & Goaied, Mohamed, 2021. "The nonlinear effect of foreign ownership on capital structure in Japan: A panel threshold analysis," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:pacfin:v:68:y:2021:i:c:s0927538x21001013
    DOI: 10.1016/j.pacfin.2021.101594
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    More about this item

    Keywords

    Ownership structure; Foreign ownership; Capital structure; Monitoring power; Leverage; Panel threshold model;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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