<abstract xmlns="http://www.w3.org/1999/xhtml"><p>Existing literature has not yet defined a clear-cut relationship between ownership structure and capital structure. This study aims to contribute to this controversial argument by examining the impact of internal (managerial) ownership and external ownership on financing preferences using the case of non-financial firms listed on Karachi stock exchange during the period of 2008-2012. Our results suggest that the external ownership has a significant effect on capital structure in accordance with the presence of blockholders. In contrast, the internal ownership has a complicated effect; it shows significant positive and negative relationship to leverage at lower and certain higher proportion of managerial shareholding respectively. Besides, the combined analyses suggest that the presence of blockholders negates the impact of managerial ownership on capital structure. This implies that the presence of large and dominant shareholders in Pakistani firms may have caused a bias for debt financing to protect their voting power and returns.</p></abstract>

Existing literature has not yet defined a clear-cut relationship between ownership structure and capital structure. This study aims to contribute to this controversial argument by examining the impact of internal (managerial) ownership and external ownership on financing preferences using the case of non-financial firms listed on Karachi stock exchange during the period of 2008-2012. Our results suggest that the external ownership has a significant effect on capital structure in accordance with the presence of blockholders. In contrast, the internal ownership has a complicated effect; it shows significant positive and negative relationship to leverage at lower and certain higher proportion of managerial shareholding respectively. Besides, the combined analyses suggest that the presence of blockholders negates the impact of managerial ownership on capital structure. This implies that the presence of large and dominant shareholders in Pakistani firms may have caused a bias for debt financing to protect their voting power and returns.

Ownership and Capital Structure of Pakistani Non Financial Firms

Financial Internet Quarterly

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

{"article-title":"Ownership and Capital Structure of Pakistani Non Financial Firms"}

Existing literature has not yet defined a clear-cut relationship between ownership structure and capital structure. This study aims to contribute to this...

Ownership and Capital Structure of Pakistani Non Financial Firms

Published Online: Feb 09, 2017

Page range: 57 - 67

Received: Oct 03, 2015

Accepted: Apr 26, 2016

DOI: https://doi.org/10.1515/fiqf-2016-0136

Keywords
capital structure, ownership structure, shareholders, Pakistan

© 2017

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Ownership and Capital Structure of Pakistani Non Financial Firms

Published Online: Feb 09, 2017

Page range: 57 - 67

Received: Oct 03, 2015

Accepted: Apr 26, 2016

DOI: https://doi.org/10.1515/fiqf-2016-0136

Keywordscapital structure, ownership structure, shareholders, Pakistan

© 2017

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
capital structure, ownership structure, shareholders, Pakistan