European Capital Structures: Managerial Insight and Governance Regimes

Charles Reuter ()
Additional contact information
Charles Reuter: CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine

Post-Print from HAL

Abstract: We investigate the determinants of Capital Structure in Europe and we implement a novel approach focusing on the relevance of manager's knowledge and behaviors for leverage ratios in aggregate. We show that this relevance is moderated by the governance structure of firms. Specifically we show that firms with concentrated-ownership exhibit a negative relation between managerial sentiment and both measures of leverage (market and book leverages) while firms with dispersed ownership exhibit a positive relation to market leverage only (no relation is obtained on medium-range firms). We further show that other dimensions relating to transparency, size & prominence moderate the relationship. Our contribution extends to debates on agency and corporate governance. We emphasize the practical importance between two dominant views of agency: managers vs. shareholders and control-holders vs. minority shareholders. While illustrating this relevance, we suggest that different governance structures, that is, different kinds of agency conflicts, lead to different managers' behaviors in aggregate and different market valuation of these behaviors. An implication is that a normative assessment of managerial action may depend on the underlying governance regime.

Keywords: Agency Theory; International Capital Structure; Economic Sentiment; Corporate Governance; Dispersed & concentrated ownership (search for similar items in EconPapers)
Date: 2009-07
References: Add references at CitEc
Citations:

Published in Association of International Business, Jul 2009, Sao Paolo, Brazil

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:hal:journl:hal-03550009

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().