Ownership Structure and Capital Structure

This paper reports evidence in support of the hypothesis that closely-held ownership, institutional holdings and the degree of financial leverage are jointly and endogenously determined. An inverse relation between the percentage of closely-held shares and institutional holdings is apparent, as is a compatible inverse link between institutional holdings and leverage. A somewhat more complex link between closely-held ownership and leverage is suggested. High financial leverage generally reduces the percentage of closely-held shares, but already high closely-held ownership can work to increase the optimal degree of financial leverage