TY - JOUR
T1 - The relationship between capital structure and ownership structure
T2 - New evidence from Jordanian panel data
AU - Al-Najjar, Basil
AU - Taylor, Peter
PY - 2008/10/17
Y1 - 2008/10/17
N2 - Purpose – The study aims to investigate the comparatively under-researched relationship between ownership structure and capital structure in an emerging market. It is also one of the first studies to apply both single and reduced-form equation methods using a panel data approach. Design/methodology/approach – The study applies econometrics modelling using both single equation and reduces equation models for panel data. Findings – The results demonstrate that Jordanian firms follow the same determinants of capital structure as occur in developed markets, namely: profitability, firm size, growth rate, market-to-book ratio, asset structure and liquidity. In addition, institutional ownership structure is found to be determined by: assets structure, business risk (BR), growth opportunities and firm size. Finally, the results reveal that assets tangibility, firm size, growth opportunities and BR are considered to be joint determinants of ownership structure and capital structure. Practical implications – The practical implication of the study is that investors and managers should consider both capital structure and ownership structure when they take their investment decisions. Originality/value – This is the first study of the interaction between institutional ownership and capital structure in Jordan where there are differences, as regards institutional and financial structures, relative to those in developed markets.
AB - Purpose – The study aims to investigate the comparatively under-researched relationship between ownership structure and capital structure in an emerging market. It is also one of the first studies to apply both single and reduced-form equation methods using a panel data approach. Design/methodology/approach – The study applies econometrics modelling using both single equation and reduces equation models for panel data. Findings – The results demonstrate that Jordanian firms follow the same determinants of capital structure as occur in developed markets, namely: profitability, firm size, growth rate, market-to-book ratio, asset structure and liquidity. In addition, institutional ownership structure is found to be determined by: assets structure, business risk (BR), growth opportunities and firm size. Finally, the results reveal that assets tangibility, firm size, growth opportunities and BR are considered to be joint determinants of ownership structure and capital structure. Practical implications – The practical implication of the study is that investors and managers should consider both capital structure and ownership structure when they take their investment decisions. Originality/value – This is the first study of the interaction between institutional ownership and capital structure in Jordan where there are differences, as regards institutional and financial structures, relative to those in developed markets.
KW - Capital structure
KW - Corporate ownership
KW - Jordan
UR - http://www.scopus.com/inward/record.url?scp=85015658114&partnerID=8YFLogxK
U2 - 10.1108/03074350810915851
DO - 10.1108/03074350810915851
M3 - Article
AN - SCOPUS:85015658114
SN - 0307-4358
VL - 34
SP - 919
EP - 933
JO - Managerial Finance
JF - Managerial Finance
IS - 12
ER -