A Revisiting of Ownership Structures and Capital Structures Relationship: Evidence From East Asian Financial Crisis
Herrera, Juan Jose Duran
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Some previous research findings indicate that the relationship between ownership structure and company performance which is assumed it is influence by the relationship between managers and shareholder of the company. This relationship would have the potential to affect the decision making in an organization which has an impact to company’s value. This purpose of this research is to extend and expand the existing empirical findings by testing the relationship between ownership structure and capital structure in the context of post-Asian financial crisis which has limited research on it. By using the agency theory, we argued that the distribution of ownership structure of the company’s managers and external shareholders group have significant influence on the company’s debt. The sample used in this research is 481 companies in five ASEAN member countries in the period of 2000-2001. The research tested four hypotheses related to the structural ownership and capital structure. The result of the research shows that there is a positive relationship between external shareholders group and company’s debt, the relationship of a linear curve between the level of managerial share ownership and company’s debt, and the relationship between external shareholders group and company’s debt based on the capacity of existing managerial share ownership. The finding of this research is to support the hypotheses of “active monitoring”, “convergence of interest”, and “entrenchment hypotheses” that has been examined in different context.