A nonlinear simultaneous equation analysis of managerial ownership and debt policy : Evidence from Tunisian Stock Exchange

Abstract

The agency relationship between managers and shareholders has the potential to influence decision-making in the firm which in turn potentially impacts on firm characteristics such as leverage. Prior evidence has demonstrated an association between ownership structure and firm value. This paper extends the literature by examining a further link between ownership structure and capital structure. Based on a system of simultaneous equations on the basis of a panel of Tunisian companies listed on the Tunisian stock exchange during the period 2000-2009, our results show that the ownership structure affects the capital structure and vice versa. In addition, the relationship between debt and managerial ownership is nonlinear.Keywords: Corporate governance, debt policy, ownership structure, free cash flow.

The Influence of Managerial Ownership and Firm Size On Debt Policy

“…Increased ownership of shares by managers will lead to the importance of convergence between managers and shareholders in reducing agency conflict. Moussa and Chichti (2013) found a non-linear relationship between managerial ownership of debt. The same study conducted by Hatem (2015) who found managerial ownership of debt is non-linear.…”

Corporate Ownership Structure and Its Effect on Capital Structure: Evidence from BSE Listed Manufacturing Companies in India

“…Owning stock in a company translates directly into having voting rights on important issues, as they have more equity and more voting power. Corporate owners are more likely to engage effectively in the governance process (Moussa & Chichti, 2014; Martins & Costa, 2019). In certain situations, active corporate shareholders can contribute to a business being better regulated, which will benefit individual, non-corporate shareholders.…”