Relationship between Ownership Structure and Capital Structure

Abstract

Objective – The main objective of this study is to measure the relationship between ownership structure and capital structure by using the chemical sector of Pakistan.
 Design – This study is used the panel data and retrieved from the annual reports of the chemical sector of Pakistan for the time period of 2012 to 2017.
 Findings – The finding the statistical analysis shows that ownership structure has a significant positive relationship on capital structure. Which mitigate the agency conflicts among managers and shareholders, because the majority of the shareholders would like to have a higher level of debt over equity financing.
 Policy Implications – The findings of this study also can be helpful to the policymakers, investors and financial institution in designing ownership structures and financing decisions for firms. 
 Originality – This is the first study that examined the relationship between ownership structure and capital structure in the context of the chemical sector of Pakistan.

Role of Ownership Concentration and Dividend Policy on Firm Performance

“…Corporate administration is a significant component in the field of finance. Ownership concentration can be defined as the most significant number of block holder (Murtaza & Azam, 2019). It considered an essential indicator of corporate governance mechanisms to reduce agency issues.…”

“…In this research, firm performance is used as a dependent variable and measured by return on assets (ROA) (Briones & Chang, 2017). ROA is calculated as EBIT/ total assets (Murtaza & Azam, 2019;Riaz, 2015); which shows that how much a firm earned by the investment of the assets and how the managers use the investor's fund (Vătavu, 2015) or in other words it generates the idea about how effectively management make decisions to generate significant earnings (Nawaz & Haniffa, 2017).…”

Ownership Concentration, Dividend Policy and Firm Performance in Pakistan

“…Firm performance is measured through return on assets (ROA) (Briones & Chang, 2017). It is calculated by earnings before interest and tax divided by total assets (Murtaza & Azam, 2019;Riaz, 2015); which shows that how much a firm earned by investment of the assets and how the managers use effectively the investors fund (Vătavu, 2015) or in other words it generates an idea about how efficient management using its assets to generate large earnings (Nawaz & Haniffa, 2017).…”

“…The current study analyzed ownership concentration (OWNR) and dividend policy are independent variable. OWNR is calculated as a percentage of equity held by the top 5 substantial shareholders of the firm (Murtaza & Azam, 2019;Paramanantham, Ting, & Kweh, 2018;Xinyuan, Nan, & Yufei, 2017). While dividend policy (DP) is calculated as cash dividend divided by net income (Maladjian & Khoury, 2014).…”

“…Board size (BSZ), as measured by the log of number of board of directors (Abor, 2007;Kajananthan, 2012;Khawaja, Bhatti, Ashraf, & Henry, 2018;Murtaza & Azam, 2019). Whereas leverage (LEV) is calculated as total debt divided by total assets (Ilmas, Tahir, & Asrar-ul-Haq, 2018) and firm size (FSZ) is calculated by taking the natural logarithm of total assets (Abdullah, 2005;Murtaza & Azam, 2019).…”