The impact of ownership structure and corporate governance on capital structure decisions in the UAE

his paper expands the capital structure literature by investigating how ownership shareholdings and corporate governance influence the capital structure decisions within an emerging market context, namely the United Arab Emirates (UAE). Our sample includes firms listed in both Abu Dhabi and Dubai Stock Exchanges for the period from 2008 to 2019. The UAE market is interesting because of the scarcity of research on the capital structure choices within this context. We employ panel models as well as the Two Stages Least Squares (2SLS) technique. Our results show that board structure has a negative effect on capital structure decisions. We also detect a positive impact of institutional ownership and managerial ownership on capital structure, while government ownership is inversely related to capital structure. Finally, we report that profitability negatively affects capital structure. Thus, we argue that the main determinants of capital structure reported in the developed markets literature do hold in the UAE settings. Accordingly, this study contributes to previous studies in the capital structure context and adds to its puzzle by introducing new insights into the capital structure choice in a free tax environment.