IDEAS home Printed from https://ideas.repec.org/a/taf/jbemgt/v17y2016i6p960-976.html
   My bibliography  Save this article

Ownership structure and debt as corporate governance mechanisms: an empirical analysis for Spanish SMEs

Author

Listed:
  • Ginés Hernández-Cánovas
  • Antonio Mínguez-Vera
  • Javier Sánchez-Vidal

Abstract

The purpose of this paper is to analyze the relationship between ownership structure and indebtedness for a sample of 2,544 Spanish small and medium enterprises. A System Generalized Method of Moments methodology is applied to control for the heterogeneity and endogeneity problems. The finding shows a negative effect of several measures of ownership on debt ratio. Therefore, the presence of an individual as main shareholder has a positive effect on debt, while the presence of a corporation as main shareholder exerts a negative influence. As research implications, this paper includes the agency problem based on principal-principal conflicts to explain the capital structure of small and medium enterprises, going beyond traditional principal-agent conflicts. The main practical implications of the paper is that owners who seek equity financing can use the results of this study for understanding better why investors are reluctant to invest in their small and medium enterprises. Policymakers can use the results of this study to develop better policies and to promote better provision of information for all stakeholders. About the contribution of this study, we are not aware of any paper that uses a panel of small and medium enterprises operating in a French-civil law country to examine the relationship between indebtedness and three different proxies of the ownership structure.

Suggested Citation

  • Ginés Hernández-Cánovas & Antonio Mínguez-Vera & Javier Sánchez-Vidal, 2016. "Ownership structure and debt as corporate governance mechanisms: an empirical analysis for Spanish SMEs," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 17(6), pages 960-976, November.
    • Handle: RePEc:taf:jbemgt:v:17:y:2016:i:6:p:960-976
    DOI: 10.3846/16111699.2013.859171
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.3846/16111699.2013.859171
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.3846/16111699.2013.859171?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kayo, Eduardo K. & Kimura, Herbert, 2011. "Hierarchical determinants of capital structure," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 358-371, February.
    2. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    3. Omer Brav, 2009. "Access to Capital, Capital Structure, and the Funding of the Firm," Journal of Finance, American Finance Association, vol. 64(1), pages 263-308, February.
    4. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer & Robert Vishny, 2002. "Investor Protection and Corporate Valuation," Journal of Finance, American Finance Association, vol. 57(3), pages 1147-1170, June.
    5. Curry, B & George, K D, 1983. "Industrial Concentration: A Survey," Journal of Industrial Economics, Wiley Blackwell, vol. 31(3), pages 203-255, March.
    6. Rajan, Raghuram G, 1992. "Insiders and Outsiders: The Choice between Informed and Arm's-Length Debt," Journal of Finance, American Finance Association, vol. 47(4), pages 1367-1400, September.
    7. Jorge Farinha, 2003. "Dividend Policy, Corporate Governance and the Managerial Entrenchment Hypothesis: An Empirical Analysis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(9‐10), pages 1173-1209, December.
    8. Sharpe, Steven A, 1990. "Asymmetric Information, Bank Lending, and Implicit Contracts: A Stylized Model of Customer Relationships," Journal of Finance, American Finance Association, vol. 45(4), pages 1069-1087, September.
    9. Attig, Najah & Fong, Wai-Ming & Gadhoum, Yoser & Lang, Larry H.P., 2006. "Effects of large shareholding on information asymmetry and stock liquidity," Journal of Banking & Finance, Elsevier, vol. 30(10), pages 2875-2892, October.
    10. Cubbin, John S & Leech, Dennis, 1983. "The Effect of Shareholding Dispersion on the Degree of Control in British Companies: Theory and Measurement," Economic Journal, Royal Economic Society, vol. 93(37), pages 351-369, June.
    11. Michael N. Young & Mike W. Peng & David Ahlstrom & Garry D. Bruton & Yi Jiang, 2008. "Corporate Governance in Emerging Economies: A Review of the Principal–Principal Perspective," Journal of Management Studies, Wiley Blackwell, vol. 45(1), pages 196-220, January.
    12. Lukas Setia‐Atmaja & George A. Tanewski & Michael Skully, 2009. "The Role of Dividends, Debt and Board Structure in the Governance of Family Controlled Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(7‐8), pages 863-898, September.
    13. Ronald C. Anderson & David M. Reeb, 2003. "Founding-Family Ownership and Firm Performance: Evidence from the S&P 500," Journal of Finance, American Finance Association, vol. 58(3), pages 1301-1327, June.
    14. Murray Z. Frank & Vidhan K. Goyal, 2009. "Capital Structure Decisions: Which Factors Are Reliably Important?," Financial Management, Financial Management Association International, vol. 38(1), pages 1-37, March.
    15. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    16. Himmelberg, Charles P. & Hubbard, R. Glenn & Palia, Darius, 1999. "Understanding the determinants of managerial ownership and the link between ownership and performance," Journal of Financial Economics, Elsevier, vol. 53(3), pages 353-384, September.
    17. Ram Mudambi & Carmela Nicosia, 1998. "Ownership structure and firm performance: evidence from the UK financial services industry," Applied Financial Economics, Taylor & Francis Journals, vol. 8(2), pages 175-180.
    18. Eugene F. Fama, 2002. "Testing Trade-Off and Pecking Order Predictions About Dividends and Debt," Review of Financial Studies, Society for Financial Studies, vol. 15(1), pages 1-33, March.
    19. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    20. Bertrand, Marianne & Johnson, Simon & Samphantharak, Krislert & Schoar, Antoinette, 2008. "Mixing family with business: A study of Thai business groups and the families behind them," Journal of Financial Economics, Elsevier, vol. 88(3), pages 466-498, June.
    21. Jorge Farinha, 2003. "Dividend Policy, Corporate Governance and the Managerial Entrenchment Hypothesis: An Empirical Analysis," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(9-10), pages 1173-1209.
    22. Claessens, Stijn & Yurtoglu, B. Burcin, 2013. "Corporate governance in emerging markets: A survey," Emerging Markets Review, Elsevier, vol. 15(C), pages 1-33.
    23. repec:elg:eebook:14347 is not listed on IDEAS
    24. DeAngelo, Harry & DeAngelo, Linda, 2000. "Controlling stockholders and the disciplinary role of corporate payout policy: a study of the Times Mirror Company," Journal of Financial Economics, Elsevier, vol. 56(2), pages 153-207, May.
    25. Hadiye Aslan & Praveen Kumar, 2012. "Strategic Ownership Structure and the Cost of Debt," Review of Financial Studies, Society for Financial Studies, vol. 25(7), pages 2257-2299.
    26. Ronald C. Anderson & David M. Reeb, 2003. "Founding‐Family Ownership and Firm Performance: Evidence from the S&P 500," Journal of Finance, American Finance Association, vol. 58(3), pages 1301-1328, June.
    27. Bartholdy, Jan & Mateus, Cesário, 2011. "Debt and taxes for private firms," International Review of Financial Analysis, Elsevier, vol. 20(3), pages 177-189, June.
    28. Yacine Belghitar & James Khan, 2013. "Governance mechanisms, investment opportunity set and SMEs cash holdings," Small Business Economics, Springer, vol. 40(1), pages 59-72, January.
    29. Lukas Setia‐Atmaja & George A. Tanewski & Michael Skully, 2009. "The Role of Dividends, Debt and Board Structure in the Governance of Family Controlled Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 36(7‐8), pages 863-898, September.
    30. Lin, Chen & Ma, Yue & Malatesta, Paul & Xuan, Yuhai, 2013. "Corporate ownership structure and the choice between bank debt and public debt," Journal of Financial Economics, Elsevier, vol. 109(2), pages 517-534.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mário Santos & António Moreira & Elisabete Vieira, 2014. "Ownership concentration, contestability, family firms, and capital structure," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(4), pages 1063-1107, November.
    2. ElBannan, Mona A., 2017. "Stock market liquidity, family ownership, and capital structure choices in an emerging country," Emerging Markets Review, Elsevier, vol. 33(C), pages 201-231.
    3. López-Iturriaga, Félix J. & Santana Martín, Domingo Javier, 2019. "The payout policy of politically connected firms: Tunnelling or reputation?," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    4. Yuting Huang & Anlin Chen & Lanfeng Kao, 2012. "Corporate governance in Taiwan: The nonmonotonic relationship between family ownership and dividend policy," Asia Pacific Journal of Management, Springer, vol. 29(1), pages 39-58, March.
    5. Ujjayini Roy & Indrani Chakraborty, 2023. "Market concentration, agency cost and firm performance: a case study on Indian corporate firms," Economic Change and Restructuring, Springer, vol. 56(4), pages 2645-2693, August.
    6. Alexandros Sikalidis & Konstantinos Bozos & Antonios Chantziaras & Christos Grose, 2022. "Influences of family ownership on dividend policy under mandatory dividend rules," Review of Quantitative Finance and Accounting, Springer, vol. 59(3), pages 939-967, October.
    7. Mulyani, Evy & Singh, Harminder & Mishra, Sagarika, 2016. "Dividends, leverage, and family ownership in the emerging Indonesian market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 43(C), pages 16-29.
    8. Lin, Qi, 2015. "Growth options effect on leverage: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 34(C), pages 152-168.
    9. Isakov, Dusan & Weisskopf, Jean-Philippe, 2013. "Do not wake sleeping dogs: Pay-out policies in founding family firms," FSES Working Papers 443, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    10. Erhan Kilincarslan, 2018. "The Factors Determining the Dividend Policy of Financial Firms Listed on the Borsa Istanbul," Bogazici Journal, Review of Social, Economic and Administrative Studies, Bogazici University, Department of Economics, vol. 32(1), pages 75-109.
    11. James, Hui & Benson, Bradley W. & Wu, Chen (Ken), 2017. "Does CEO ownership affect payout policy? Evidence from using CEO scaled wealth-performance sensitivity," The Quarterly Review of Economics and Finance, Elsevier, vol. 65(C), pages 328-345.
    12. Taylan Mavruk & Conny Overland & Stefan Sjögren, 2020. "Keeping it real or keeping it simple? Ownership concentration measures compared," European Financial Management, European Financial Management Association, vol. 26(4), pages 958-1005, September.
    13. Paul McGuinness & Kevin Lam & João Vieito, 2015. "Gender and other major board characteristics in China: Explaining corporate dividend policy and governance," Asia Pacific Journal of Management, Springer, vol. 32(4), pages 989-1038, December.
    14. Zhang, Dongyang & Liu, Deqiang, 2017. "Determinants of the capital structure of Chinese non-listed enterprises: Is TFP efficient?," Economic Systems, Elsevier, vol. 41(2), pages 179-202.
    15. Miguel Angel Acedo-Ramirez & Juan Carlos Ayala Calvo & Ernesto Navarrete-Martinez, 2017. "Determinants of Capital Structure: Family Businesses versus Non-Family Firms," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(2), pages 80-103, April.
    16. Cambrea, Domenico Rocco & Ponomareva, Yuliya & Pittino, Daniel & Minichilli, Alessandro, 2022. "Strings attached: Socioemotional wealth mixed gambles in the cash management choices of family firms," Journal of Family Business Strategy, Elsevier, vol. 13(3).
    17. Alves, Paulo & Couto, Eduardo Barbosa & Francisco, Paulo Morais, 2015. "Board of directors’ composition and capital structure," Research in International Business and Finance, Elsevier, vol. 35(C), pages 1-32.
    18. Kabbach-de-Castro, Luiz Ricardo & Kalatzis, Aquiles Elie Guimarães & Pellicani, Aline Damasceno, 2022. "Do financial constraints in an unstable emerging economy mitigate the opportunistic behavior of entrenched family owners?," Emerging Markets Review, Elsevier, vol. 50(C).
    19. Anneleen Michiels & Wim Voordeckers & Nadine Lybaert & Tensie Steijvers, 2015. "Dividends and family governance practices in private family firms," Small Business Economics, Springer, vol. 44(2), pages 299-314, February.
    20. Alves, Paulo & Couto, Eduardo & Francisco, Paulo, 2014. "Board of directors’ composition and financing choices," MPRA Paper 52973, University Library of Munich, Germany, revised 2014.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:jbemgt:v:17:y:2016:i:6:p:960-976. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/TBEM20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.