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Ownership, capital structure and financing decision : evidence from the UK.

Sun, J. and Ding, L. and Guo, M. and Li, Y. (2016) 'Ownership, capital structure and financing decision : evidence from the UK.', British accounting review., 48 (4). pp. 448-463.


This paper examines whether and to what degree agency conflicts in ownership structure affect firm leverage ratios and external financing decisions, using a universal sample of UK firms from 1998 to 2012. We use two distinctive measures to capture ownership structure, namely, managerial share ownership (MSO) and institutional ownership. Our empirical results show a non-monotonic relation between MSO and the debt ratio, supporting two competing theories: interest alignment theory and the management entrenchment hypothesis. Nevertheless, institutional ownership is found to be positively related to firm leverage levels. Our results further suggest that firms with concentrated MSO decrease their leverage by increasing the probability of issuing equity over bonds, an effect strengthened during hot market periods.

Item Type:Article
Keywords:Ownership, Capital structure, Market valuation, Security issuance, Agency theory.
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Publisher statement:NOTICE: this is the author’s version of a work that was accepted for publication in The British Accounting Review. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in The British Accounting Review, Volume 48, Issue 4, December 2016, 10.1016/
Date accepted:17 April 2015
Date deposited:06 May 2015
Date of first online publication:18 April 2015
Date first made open access:18 April 2017

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