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The nonlinear effect of foreign ownership on capital structure in Japan: A panel threshold analysis

Rami Zeitun and Mohamed Goaied

Pacific-Basin Finance Journal, 2021, vol. 68, issue C

Abstract: This study scrutinizes the nonlinear relationship between foreign ownership and corporate leverage decisions by applying a panel threshold model to a sample that comprises a balanced panel data set of 1027 Japanese firms. Moreover, this study investigates whether a threshold for the level of foreign ownership moderates the effect of determinants on capital structure. The empirical findings support the existence of a threshold effect for foreign ownership on corporate capital structure and its determinants. Furthermore, our findings have managerial implications for foreign investors with a high level of ownership in that they should mainly use liquidity, profitability, and growth to reduce leverage.

Keywords: Ownership structure; Foreign ownership; Capital structure; Monitoring power; Leverage; Panel threshold model (search for similar items in EconPapers)
JEL-codes: C33 C50 G30 G32 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.pacfin.2021.101594

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