Managerial Ownership, Debt Policy, and the Impact of Institutional Holdings: An Agency Perspective

Chenchuramaiah T. Bathala, Kenneth P. Moon and Ramesh Rao ()

Financial Management, 1994, vol. 23, issue 3

Abstract: This study investigates the effects of' institutional ownership on the debt policy and managerial ownership of the firm. Earlier literature on the agency model of the firm widely recognizes that the use of managerial stock ownership and external debt play an important role in limiting agency conflicts and enhancing firm value. The literature also recognizes that external monitors, such as institutional investors, can serve a useful role in limiting agency problems in the firm. However, investigations into the usefulness of' these agency-conflict-reducing mechanisms have tended to treat each in isolation with little attempt to study the inter-relationships among them. This study examines the impact of institutional holdings on managerial ownership and debt policy in an integrated framework utilizing a simultaneous system of equations estimation procedure. The study hypothesizes that the use of debt and managerial stock ownership are inversely related to institutional ownership in the firm. The empirical evidence provided in this study is consistent with this hypothesis.

Date: 1994
References: Add references at CitEc
Citations: View citations in EconPapers (69)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fma:fmanag:bathala94

Access Statistics for this article

Financial Management is currently edited by Bill Christie

More articles in Financial Management from Financial Management Association University of South Florida 4202 E. Fowler Ave. COBA #3331 Tampa, FL 33620. Contact information at EDIRC.
Bibliographic data for series maintained by Courtney Connors ( this e-mail address is bad, please contact ).