What is the role of institutional investors in corporate capital structure decisions? A survey analysis

Stephen Brown (), Marie Dutordoir, Chris Veld and Yulia Veld-Merkoulova

Journal of Corporate Finance, 2019, vol. 58, issue C, 270-286

Abstract: We survey institutional investors about their role in capital structure decisions and views on capital structure theories. Over 82% of investors believe they influence corporate capital structure decisions, especially for smaller, younger, and more financially constrained firms. Unlike corporate managers, investors consider agency costs of free cash flow important drivers of capital structure. Investors' responses also support pecking order and market timing theories. Most investors find financial constraints important, with components of the Kaplan–Zingales and Whited–Wu indexes dominating other proxies. Overall, our findings suggest a first-order impact of investor preferences on capital structure decisions.

Keywords: Capital structure; Capital supply; Institutional investors; Security issuance; Security design; Financial constraints (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:58:y:2019:i:c:p:270-286

DOI: 10.1016/j.jcorpfin.2019.05.001

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