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The relationship between capital structure and ownership structure: New evidence from Jordanian panel data

Al-Najjar, Basil and Taylor, P. (2008) The relationship between capital structure and ownership structure: New evidence from Jordanian panel data. Managerial Finance 34 (1), pp. 919-933. ISSN 0307-4358.

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Official URL: http://dx.doi.org/10.1108/03074350810915851

Abstract

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.

Item Type: Article
School or Research Centre: Birkbeck Schools and Research Centres > School of Business, Economics & Informatics > Management
Depositing User: Dr Basil Al-Najjar
Date Deposited: 25 Oct 2012 10:19
Last Modified: 17 Apr 2013 12:25
URI: http://eprints.bbk.ac.uk/id/eprint/5382

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