The Impact of Ownership Structure On Corporate Debt Policy: a Time-Series Cross-Sectional Analysis

This study examines the influence of agency costs and ownership concentration on the capital structure of the firm. Of particular interest is the composition of equity ownership as a determinant of overall capital structure and the dynamic adjustment of capital structure to changes in the equity ownership. Results indicate that the distribution of equity ownership is important in explaining overall capital structure and that managers do reduce the level of debt as their own wealth is increasingly tied to the firm. It is also noted that the time-series component is important in resolving the conflicting results reported in prior research.