Skip to content
Back to outputs

Shareholders' control rights, family ownership and the firm's leverage decisions

Research output: Contribution to journalArticle

Standard

Shareholders' control rights, family ownership and the firm's leverage decisions. / Amin, Qazi Awais; Liu, Jia.

In: International Review of Financial Analysis, Vol. 72, 101591, 01.11.2020.

Research output: Contribution to journalArticle

Harvard

APA

Vancouver

Author

Amin, Qazi Awais ; Liu, Jia. / Shareholders' control rights, family ownership and the firm's leverage decisions. In: International Review of Financial Analysis. 2020 ; Vol. 72.

Bibtex

@article{613daf053eb2456b9fc69467d15ad94a,
title = "Shareholders' control rights, family ownership and the firm's leverage decisions",
abstract = "We investigate the association between controlling shareholders' ownership (CS_Own) and firms' leverage decisions in the Singaporean context. We examine whether the impact of ownership concentration on leverage differs across excess and lower control. We report that shareholders with excess control prefer leverage financing for an optimal capital structure and focus on value maximisation rather using leverage as a tool of minority shareholders' expropriation. Our analysis shows that firms capital structure significantly influences by the coalition of shareholders particularly decisions about leverage financing in addition to the firms' specific characteristics and institutional arrangements. Our empirical evidence shows that controlling shareholders with a lower fraction of equity are more concerned about limited holding thus prefer leverage over equity financing to inflate their equity stake to protect them from the potential takeovers and mergers. We report that capital structure decisions in Singapore are linked with the trade-off between the controlling shareholders' target of mitigating firm risk and their non-dilution entrenchment needs. Further, we found an inverted U-shaped association between control ownership and leverage financing. In terms of moderating effect of family-controlled ownership, our findings exhibit that leverage financing is less pronounced for family firms in Singapore due to the under-diversified investment portfolio.",
keywords = "Ownership concentration, Control rights, Cash flow rights, Leverage, Family ownership, Agency theory, embargoover12",
author = "Amin, {Qazi Awais} and Jia Liu",
year = "2020",
month = sep,
day = "28",
doi = "10.1016/j.irfa.2020.101591",
language = "English",
volume = "72",
journal = "International Review of Financial Analysis",
issn = "1057-5219",
publisher = "Elsevier Inc.",

}

RIS

TY - JOUR

T1 - Shareholders' control rights, family ownership and the firm's leverage decisions

AU - Amin, Qazi Awais

AU - Liu, Jia

PY - 2020/9/28

Y1 - 2020/9/28

N2 - We investigate the association between controlling shareholders' ownership (CS_Own) and firms' leverage decisions in the Singaporean context. We examine whether the impact of ownership concentration on leverage differs across excess and lower control. We report that shareholders with excess control prefer leverage financing for an optimal capital structure and focus on value maximisation rather using leverage as a tool of minority shareholders' expropriation. Our analysis shows that firms capital structure significantly influences by the coalition of shareholders particularly decisions about leverage financing in addition to the firms' specific characteristics and institutional arrangements. Our empirical evidence shows that controlling shareholders with a lower fraction of equity are more concerned about limited holding thus prefer leverage over equity financing to inflate their equity stake to protect them from the potential takeovers and mergers. We report that capital structure decisions in Singapore are linked with the trade-off between the controlling shareholders' target of mitigating firm risk and their non-dilution entrenchment needs. Further, we found an inverted U-shaped association between control ownership and leverage financing. In terms of moderating effect of family-controlled ownership, our findings exhibit that leverage financing is less pronounced for family firms in Singapore due to the under-diversified investment portfolio.

AB - We investigate the association between controlling shareholders' ownership (CS_Own) and firms' leverage decisions in the Singaporean context. We examine whether the impact of ownership concentration on leverage differs across excess and lower control. We report that shareholders with excess control prefer leverage financing for an optimal capital structure and focus on value maximisation rather using leverage as a tool of minority shareholders' expropriation. Our analysis shows that firms capital structure significantly influences by the coalition of shareholders particularly decisions about leverage financing in addition to the firms' specific characteristics and institutional arrangements. Our empirical evidence shows that controlling shareholders with a lower fraction of equity are more concerned about limited holding thus prefer leverage over equity financing to inflate their equity stake to protect them from the potential takeovers and mergers. We report that capital structure decisions in Singapore are linked with the trade-off between the controlling shareholders' target of mitigating firm risk and their non-dilution entrenchment needs. Further, we found an inverted U-shaped association between control ownership and leverage financing. In terms of moderating effect of family-controlled ownership, our findings exhibit that leverage financing is less pronounced for family firms in Singapore due to the under-diversified investment portfolio.

KW - Ownership concentration

KW - Control rights

KW - Cash flow rights

KW - Leverage

KW - Family ownership

KW - Agency theory

KW - embargoover12

UR - https://linkinghub.elsevier.com/retrieve/pii/S1057521920302350

U2 - 10.1016/j.irfa.2020.101591

DO - 10.1016/j.irfa.2020.101591

M3 - Article

VL - 72

JO - International Review of Financial Analysis

JF - International Review of Financial Analysis

SN - 1057-5219

M1 - 101591

ER -

ID: 22978949