Impact of foreign ownership on capital structure and firm value in emerging market: case of Amman Stock Exchange listed firms

This research examines the impact of foreign ownership on capital structure and the impact of foreign ownership on firms' value in the non-financial listed companies in Amman Stock Exchange, taking into consideration the effects of the sector to which the firm belongs. Panel data sets are formed and panel data techniques are used. We develop two models using interaction terms to incorporate the sector's effect. We use Driscoll-Kraay approach to resolve the heteroskedasticity problem of the fixed effect method. The empirical results suggest a significant negative relationship between foreign ownership and all three measurements of capital structure; although foreign ownership has the largest effect on the short term market leverage relative to both long term and total market leverage. The sector of the firms matters and especially when it comes to the impact of the services sector, it is found that the foreign ownership impact is always statistically significant, although it has a lower impact for the industrial firms. A strong significant positive relationship between foreign ownership and firms' value is also found, and the sector of the firms is found to be an important variable in the firm's value determination.