The Relation between Ownership Structure and Capital Structure: Empirical study of DAX firms
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2020-12-07
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en
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Abstract
This paper investigates the effects of managerial ownership and ownership block holders on the capital structure of the firm by using an agency framework. The research extends the literature on the subject by examining the relation between equity ownership and debt-ratios in DAX firms. Furthermore, possible interaction effects between management ownership and external block holder ownership are analyzed. The findings of the empirical study suggest that debt-ratio is negatively related to managerial ownership and positively related to external block holder ownership. Moreover, the negative relationship between managerial ownership and debt-ratio is negated by large external block holders. The observed negative correlation becomes insignificant in the presence of large external shareholders. The findings of this study suggest that large external block holders influence the agency cost of equity and debt.
JEL classification: G30, G32
Keywords: Capital structure; Management ownership; External shareholders; Agency cost
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Faculteit der Managementwetenschappen