The Interaction of Capital Structure and Ownership Structure

@article{MahrtSmith2005TheIO,
  title={The Interaction of Capital Structure and Ownership Structure},
  author={Jan Mahrt-Smith},
  journal={The Journal of Business},
  year={2005},
  volume={78},
  pages={787-816}
}
  • Jan Mahrt-Smith
  • Published 2005
  • Business
  • The Journal of Business
  • We develop a model of the interaction of firms' capital and ownership structures. The structures are designed to trade off managerial discipline versus managerial initiative. Debt features constrain managerial choice following poor firm performance. Equity ownership dispersion increases managerial initiative, by granting some managerial freedom following high firm performance. The empirical predictions are: equity ownership should be concentrated when debt is closely held, effective debt… CONTINUE READING
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