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Ownership structure and corporate financing

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  • Nedal Al-Fayoumi
  • Bana Abuzayed

Abstract

This article examines empirically the effect of ownership structure on the corporate financing decision from the agency theory perspective. This article contributes to the literature by examining the static and the dynamic effects of managerial insiders and large shareholders' ownership on the capital structure. Based on panel data analysis for a sample of Jordanian industrial firms during the period 2001 to 2005, the study provides empirical evidence indicating that the debt ratio is negatively related to managerial ownership and inconclusively related to individual block-holders' ownership. Moreover, the study finds no significant relationship between debt ratio and institutional ownership. These results are consistent with the entrenchment behaviour of managers and passive monitoring by institutions. Finally, supporting the results of previous literature, this study reveals that the capital structure is affected by firm's profitability, size and growth.

Suggested Citation

  • Nedal Al-Fayoumi & Bana Abuzayed, 2009. "Ownership structure and corporate financing," Applied Financial Economics, Taylor & Francis Journals, vol. 19(24), pages 1975-1986.
    • Handle: RePEc:taf:apfiec:v:19:y:2009:i:24:p:1975-1986
    DOI: 10.1080/09603100903266807
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    2. Palaniappan Gurusamy, 2024. "Corporate Ownership Structure and Its Effect on Capital Structure: Evidence from BSE Listed Manufacturing Companies in India," IIM Kozhikode Society & Management Review, , vol. 13(2), pages 135-153, July.
    3. Alhababsah, Salem, 2019. "Ownership structure and audit quality: An empirical analysis considering ownership types in Jordan," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 35(C), pages 71-84.
    4. Ashraf, Dawood & Rizwan, Muhammad Suhail & Azmat, Saad, 2021. "Not one but three decisions in sukuk issuance: Understanding the role of ownership and governance," Pacific-Basin Finance Journal, Elsevier, vol. 69(C).
    5. Haifeng Hu & Minjing Qi, 2022. "New Evidence on National Culture and Corporate Financing: Does Institutional Quality Matter?," Sustainability, MDPI, vol. 14(19), pages 1-24, October.
    6. Vlora Prenaj & Iliriana Miftari & Besnik Krasniqi, 2023. "Determinants of the Capital Structure of Non-Listed Companies in Kosovo," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 36-50.

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