Family Ownership, Firm’s Financial Characteristics and Capital Structure: Evidence from Public Listed Companies in Malaysia

Capital structure is identified as one of focal facet in corporate finance branch of learning. It provides comprehension on how firms choose to finance their operations and expansion. The objective of this study is to explore the determinants of capital structure of Malaysian public listed companies. The period of 2001-2006 was selected in this study, which reflected the post Asian financial crisis period. Firm’s financial characteristics consist of size, growth, profitability, liquidity and ability to service debt. Family ownership which was identified as a unique feature in the Malaysian corporate sector was used to measure the effect of corporate governance in capital structure decision. Using panel data approach, this study infers that the role of ownership structure in the form of family ownership though is not significantly related to capital structure, its inclusion in the empirical equation changes the significance of other variables. Except for growth, all other financial characteristics have significant relationships with capital structure.Public - Capital Structure, Family Ownership, Corporate Finance, Corporate Governance.

Ownership structure and risk at Colombian banks

The separation between ownership and the control of capital in banks generates differences in thepreferences for risk among shareholders and the manager. These differences could imply a corporate governance problem in banks with a dispersed ownership, since owners fail to exert control in the allocation of capital. In this paper we examine the relationship between the ownership structure and risk for Colombian banks. Our results suggest that a high ownership concentration leads to higher levels of risk.corporate governance and banking risk

Capital Markets, Ownership and Distance

This paper uses a new data-set to examine how internal capital markets and foreign ownership affect investment. Our data allow us to compare investment behaviour of listed subsidiaries with stand-alone firms while controlling for investment opportunities of parent and subsidiary firms. We evaluate how the size of ownership and the geographical proximity of majority owners to their subsidiaries affect firm investment efficiency. We find that the investment of subsidiaries is more sensitive to investment opportunities than that of standalone firms and falls when investment opportunities of parent firms improve. This suggests that there are internal capital markets that reallocate funds towards units with better investment opportunities. We find that investment allocation is most efficient where parents have modest ownership stakes and are distant from their subsidiaries and when subsidiaries operate in well developed financial markets. These results indicate that influence costs imposed by dominant parents may outweigh their potential informational benefits, especially when subsidiaries are located in countries with weaker financial development.Investment, Internal Capital Markets, Foreign Ownership

Investment, protection, ownership, and the cost of capital

We investigate the cost of capital in a model with an agency conflict between inside managers and outside shareholders. Inside ownership reflects the classic tradeoff between incentives and risk diversification, and the severity of agency costs depends on a parameter representing investor protection. In equilibrium, the marginal cost of capital is a weighted average of terms reflecting both idiosyncratic and systematic risk, and weaker investor protection increases the weight on idiosyncratic risk. Using firm-level data from 38 countries, we estimate the predicted relationships among investor protection, inside ownership, and the marginal cost of capital. We discuss implications for the determinants of firm size, the relationship between Tobin's Q and ownership, and the effect of financial liberalizations.Investor protection, ownership, investment, cost of capital, agency costs

Bank Ownership, Firm Value and Firm Capital Structure in Europe

We investigate whether or not banks play a positive role in the ownership structure of European listed firms. We distinguish between banks and other institutional investors as shareholders and examine empirically the relationship between financial institution ownership and the performance of the firms in which they hold equity. Our main finding is that after controlling for the capital structure decision of the firms and the ownership decision of financial institutions in a simultaneous equations model, we find that there is a negative relationship between financial institution ownership and the market value of firms, measured as the Tobin's Q. This is in contradiction with the monitoring hypothesis.Financial institution ownership, Firm value, Capital structure

Homeownership and investment for social capital in Japan: Dynamic Panel approach.

This paper explores how the rate of home-ownership is related to the formation of social capital using panel data from Japan during the period 19862006. I have used Dynamic Panel estimation to control unobserved prefecture-specific fixed effects and an endogeneity bias. I have found through this estimation that the rate of home-ownership enhances the participation in voluntary activities, leading to social capital accumulation. This is in accord with findings from the United States (DiPasquale and Glaeser, 1999).Social Capital, home-ownership, length of residency.

Promarket Reforms and Allocation of Capital in India

The government of India initiated pro-market reforms in the 1990s, after almost five decades of socialist planning. These and subsequent policy reforms are credited as the drivers of India’s radical economic transformation. Prior to reforms, private investment was strictly regulated and restricted to certain areas and sectors. There have since been numerous changes in sectors important for investment, which should lead to changes in outcomes of firm-level strategic decision making and investment behavior. By most estimates, India will continue to grow. The purpose of this paper is to investigate changes in investment behavior from the introduction of reforms to current conditions. Reforms changed several institutional frameworks for firm operations, allowing firms to pursue more competitive strategies. Given the importance of ownership in determining firm efficiency and access to capital, we examine the effect of ownership on the performance of Indian firms for the period 1991-2006. We also examine industry differences in capital allocation. We compute a measure of investment efficiency derived from the accelerator principle: Elasticity of capital with respect to output. We examine the effect of various ownership structures on investment behavior and the efficiently of capital allocation across different sectors of the economy. We find that the allocation of capital has been slow to respond to reforms, indicating similar pace of firm responses.allocation of capital; India; institutional reforms; ownership

Ownership, Economic Entrenchment and Allocation of Capital

In an efficient economy, capital should be quickly (re)allocated from declining firms and sectors to more profitable investment opportunities. This process is affected by the concentration of corporate control, which in turn is affected by market institutions. We employ a panel of 12,000 firms across 44 countries to estimate the functional efficiency of capital markets. We adapt a measure for the efficiency of capital allocation using the accelerator principle. Our empirical results show weak property rights and highly concentrated ownership reduce the functional efficiency of capital markets. Findings support the economic entrenchment hypothesis but not the legal origins hypothesis.Allocation of capital; accelerator principle; ownership; functional efficiency; economic entrenchment

Who is Afraid of Political Risk? Multinational Firms and their Choice of Capital Structure

This paper investigates how multinational firms choose their capital structure in response to political risk. We focus on two choice variables, the leverage and the ownership structure of the foreign affiliate, and we distinguish different types of political risk, like expropriation, corruption and confiscatory taxation, and In our theoretical analysis we find that as political risk increases the ownership share always decreases whereas leverage can both increase or decrease, depending on the type of political risk. Using the Microdatabase Direct Investment of the Deutsche Bundesbank, we find supportive evidence for these different effects.multinational Terms; political risk; capital structure; leverage; ownership structure

The impact of divorce laws on marriage-specific capital

This paper considers how divorce law alters the incentives for couples to invest in their marriage, focusing on the impact of unilateral divorce laws on investments in new marriages. Differences across states between 1970 and 1980 provide useful quasi-experimental variation with which to consider incentives to invest in several types of marriage-specific capital: spouse's education, children, household specialization, and home ownership. I find that adoption of unilateral divorce--regardless of the prevailing property-division laws--reduces investment in all types of marriage-specific capital considered except home ownership. In contrast, results for home ownership depend on the underlying property division laws.