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The impacts of corporate ownership structure on the incentive of using capital structure to signal


  • Chin-Bun Tse
  • Joanne Ying Jia


Purpose - This paper attempts to investigate what kind of firms is more likely to use capital structure to signal; and in particular to investigate the impacts of corporate ownership structures on firms' capital structure signalling decisions. Design/methodology/approach - The paper develops theoretical models and then uses OLS multiple regression, piecewise regression and logistic regression analysis on a set of data derived from 327 UK firms listed in the FTSE ALL share index to test the hypotheses. Findings - The empirical results show that capital structure is not homogeneously used as a signalling tool; and firms with insider ownerships less or equal to 1.14 per cent are more likely the signallers. Research limitations/implications - Although other variables have been examined, this paper focuses on the impacts of insider ownership on capital structure signalling. Further work is required to investigate other variables that are mentioned but they are outside the scope of this paper. Practical implications - This paper provides useful practical insights to both managers and investors to help them better understand and interpret firms' capital structure signals. Originality/value - Before this paper, most people commonly agreed that capital structure contains signalling values. However, the findings suggest that it is not always the case.

Suggested Citation

  • Chin-Bun Tse & Joanne Ying Jia, 2007. "The impacts of corporate ownership structure on the incentive of using capital structure to signal," Studies in Economics and Finance, Emerald Group Publishing, vol. 24(2), pages 156-181, June.
  • Handle: RePEc:eme:sefpps:v:24:y:2007:i:2:p:156-181

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    Cited by:

    1. A.N. Bany-Ariffin, 2010. "Disentangling the driving force of pyramidal firms' capital structure: a new perspective," Studies in Economics and Finance, Emerald Group Publishing, vol. 27(3), pages 195-210, August.

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    Corporate ownership; Capital;


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