The Relationship Between Capital Structure And Concentrated Ownership (Agency-Related Problems)

Chee , Hong Kok (2010) The Relationship Between Capital Structure And Concentrated Ownership (Agency-Related Problems). PhD thesis, Universiti Sains Malaysia.

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Malaysia is known for its highly concentrated ownership structure. The highly concentrated ownership structure brings an advantage of having less asymmetric information but at the same time is said to be prone to agencyrelated problems such as risk shifting, empire building and shirking. Therefore, the study is undertaken to ascertain if the level of debt (capital structure level) of Malaysian companies are heavily influenced by the agencyrelated problems or create an efficient monitoring mechanism. Through previous studies from countries with similar ownership structure such as Indonesia (Taridi, 1999) and Thailand (Wiwattanakantang, 1999) show no monitoring mechanism and having monitoring mechanism respectively, Malaysia warrants a special investigation as her investor protection law is better than those of the two mentioned countries (La Porta, Lopez-de-Silanes, Shleifer and Vishny, 1998). This study addresses the relationship between capital structure and concentrated ownership (agency-related problems). Using panel data analysis methodolgy, 179 Malaysian listed Main Board firms covering a period of 11 years from 1993 to 2003 were examined. Managerial ownership did not have a significant relationship with debt ratio implying that debt is not used as a monitoring device and at the same time debt was not used to maintain control over their firm. Evidence from this study suggests that managerial ownership resulted in higher profitability and this rejects the presence of Type II agency problems (conflicts between owner-manager and minority shareholders). High ownership concentration was found to be an effective control device. The same goes for foreign ownership. There was no evidence of moral hazard problems in the form of asset tangibility in this study. This study did not find the presence of Type II agency conflicts via measures like profitabilty. Also, there was no evidence of wealth transfer (a form of Type II agency problems) through dividends.

Item Type: Thesis (PhD)
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28-70 Management. Industrial Management
Divisions: Pusat Pengajian Pengurusan (School of Management) > Thesis
Depositing User: Mr Mohammad Harish Sabri
Date Deposited: 16 Nov 2018 03:17
Last Modified: 12 Apr 2019 05:26

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