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Capital Structure, Management Ownership and Large External Shareholders: A UK Analysis

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  • Helen Short
  • Kevin Keasey
  • Darren Duxbury

Abstract

This paper examines empirically the effects of management ownership and ownership by large external shareholders on the capital structure of the firm from an agency theory perspective. The paper extends the US literature on the topic by examining the effect of interactions between management ownership and ownership by large external shareholders on the capital structure of UK firms. For a sample of UK firms, the paper provides empirical evidence that suggests the debt ratio is positively related to management ownership and negatively related to ownership by large external shareholders. Furthermore, the presence of a large external shareholder acts to negate the positive relationship between debt ratios and management ownership; in the presence of a large external shareholder, no significant relationship between debt ratios and management ownership exists. These findings are consistent with the hypothesis that the presence of large external shareholders affects the agency costs of debt and equity.

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File URL: http://www.tandfonline.com/10.1080/1357151021000010382
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Journal of the Economics of Business.

Volume (Year): 9 (2002)
Issue (Month): 3 ()
Pages: 375-399

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Handle: RePEc:taf:ijecbs:v:9:y:2002:i:3:p:375-399

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Related research

Keywords: Capital Structure; Management Ownership; External Shareholders;

References

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Citations

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Cited by:
  1. Eva Jansson, 0. "Deregulation, property rights, and legal system," European Journal of Law and Economics, Springer, vol. 0, pages 1-25.
  2. Jayesh Kumar, 2003. "Ownership Structure and Corporate Firm Performance," Finance 0304004, EconWPA.
  3. Margaritis, Dimitris & Psillaki, Maria, 2010. "Capital structure, equity ownership and firm performance," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 621-632, March.
  4. Yasmeen Akhtar & Attiya Yasmin Javid & Tariq Abbasi, 2014. "What Determines Payment Methods and Deal Amount in Corporate Merger and Acquisitions in Pakistan," PIDE-Working Papers 2014:97, Pakistan Institute of Development Economics.
  5. Gugler, Klaus & Mueller, Dennis C. & Yurtoglu, B. Burcin, 2008. "Insider ownership, ownership concentration and investment performance: An international comparison," Journal of Corporate Finance, Elsevier, vol. 14(5), pages 688-705, December.
  6. Saam, Nicole J., 2007. "Asymmetry in information versus asymmetry in power: Implicit assumptions of agency theory?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 36(6), pages 825-840, December.
  7. Viet Anh Dang, 2005. "Testing the Trade-off and Pecking Order Theory: Some UK Evidence," Money Macro and Finance (MMF) Research Group Conference 2005 28, Money Macro and Finance Research Group.
  8. Albert Agyei & Appiah Richard Owusu, 2014. "The Effect of Ownership Structure and Corporate Governance on Capital Structure of Ghanaian Listed Manufacturing Companies," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(1), pages 109-118, January.

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