Alternative Corporate Governance Paradigm and Corporate Financing: Capital Structure Choice in Employee-Governed Firm

2012 ◽  
Author(s):  
Matjaz Crnigoj ◽  
Dusan Mramor
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Corporate Financing ◽  
Structure Choice ◽  
Capital Structure Choice

scholarly journals Risk averse insiders with specific objective function and capital structure choice in European emerging economies

2013 ◽  
Vol 11 (1) ◽  
pp. 7-17
Author(s):  
Matjaž Črnigoj
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Objective Function ◽  
Emerging Economies ◽  
Structure Theory ◽  
Risk Averse ◽  
Specific Objective ◽  
Capital Structure Theory ◽  
Structure Choice ◽  
Capital Structure Choice

I provide new insights in capital structure choice in European emerging economies by extending the logic beyond the scope of modern capital structure theory, which is based on the assumption that firms are governed by shareholders and follow the goal of maximizing their wealth. I empirically investigate capital structure choice in these countries assuming an alternative corporate governance paradigm that puts risk averse insiders with specific objective function in the firm’s governance structures. I found that firms that are owned by insiders operate with significantly lower leverage, as well as that the probability that a firm uses debt at all drops if insiders are the largest shareholders.

scholarly journals Alternative corporate governance paradigm and corporate financing: Capital structure decisions in employee-governed firms

2015 ◽  
Vol 65 (2) ◽  
pp. 271-297 ◽  
Author(s):  
Matjaž Črnigoj ◽  
Dušan Mramor
Keyword(s):  
Corporate Governance ◽  
Capital Structure ◽  
Credit Rationing ◽  
Cost Of Debt ◽  
Corporate Financing ◽  
Earnings Volatility ◽  
Internal Resources ◽  
Corporate Capital ◽  
Corporate Capital Structure ◽  
Structure Choice

Assuming an alternative corporate governance paradigm that puts employees in the firm’s governance structures, as well as understanding their objective functions, we investigate capital structure decisions in employee-governed firms. Examining corporate capital structure decisions in 12 European countries, we provide strong empirical evidence of employees’ conservatism in capital structure choice. We find that employee-governed firms operate with significantly lower leverage and that employee-governed firms are significantly less levered at the same amount of earnings volatility than firms governed by other stakeholders. We also find evidence that employee-governed firms, at least in some countries, rely on internal resources to a larger extent. However, we did not find evidence that employee-governed firms have to pledge more collateral to obtain debt financing. In addition to this, we find evidence that employee-governed firms choose debt of shorter maturity and, somewhat surprisingly, that employee-governed firms in some countries are faced with lower cost of debt compared to firms governed by other stakeholders and not higher cost of debt as expected because of credit rationing and limited borrowing capacity.

The Debt Trap: Wealth Transfers and Capital Structure Choice

2011 ◽  
Author(s):  
Palani-Rajan Kadapakkam ◽  
alex meisami ◽  
John K. Wald
Keyword(s):  
Capital Structure ◽  
Structure Choice ◽  
Capital Structure Choice

scholarly journals How Country Affects the Capital Structure Choice: Literature Review and Criticism

2017 ◽  
Vol 9 (4) ◽  
pp. 1 ◽  
Author(s):  
Daniela Venanzi
Keyword(s):  
Capital Structure ◽  
Sample Selection ◽  
International Studies ◽  
Empirical Testing ◽  
Country Level ◽  
Country Characteristics ◽  
Structure Choice ◽  
Country Effect ◽  
Capital Structure Choice ◽  
The Capital Structure

Recent international financial research finds that not only firm- and industry-specific determinants, but also country-specific factors influence a firm’s capital structure. The paper’s aim is twofold. Firstly, it proposes a systematic view of the international studies on country effect since 2000, by highlighting both similarities and differences in terms of tested hypotheses, country-level determinants, expected relationships. The main outcome is a complete framework of the country characteristics, which mostly affect the capital structure choice as well as their respective theoretical rationale. Secondly, based on the above review, some areas of potential development in empirical testing will be identified, regarding test design, sample selection, dependent variable measurement, statistical methodology: the paper’s objective is to critically discuss the state of the art in this field, to hopefully improve the empirical testing of country effect on leverage in further research.

Farm capital structure choice: theory and an empirical test

2014 ◽  
Vol 74 (1) ◽  
pp. 115-132 ◽  
Author(s):  
Feng Wu ◽  
Zhengfei Guan ◽  
Robert Myers
Keyword(s):  
Theoretical Model ◽  
Capital Structure ◽  
Credit Risk ◽  
Choice Theory ◽  
Empirical Test ◽  
Theoretical Framework ◽  
Comparative Statics ◽  
Content Type ◽  
Structure Choice ◽  
Capital Structure Choice

Purpose – The purpose of this paper is to provide a unified theoretical framework that explains farm capital structure choice. Design/methodology/approach – The framework accommodates different credit access scenarios and heterogeneous risk profiles of borrowers. It recognizes that the costs of capital are endogenously determined, reflecting the degree of credit risk and accessibility to credit markets. Based on the proposed model and the comparative statics derived thereof, the paper empirically tests the impacts of different factors on capital structure choice. Findings – Based on the theoretical framework, the paper derived the impacts of different factors on capital structure choice using comparative statics. Results suggest that the potential determinants of capital structure have varying effects at different ranges of leverage. Empirical evidence supports the theoretical model. Originality/value – Despite all of previous work on various aspects of farm capital structure choice, a framework that encompasses each of the different assumptions and scenarios is still lacking. The theoretical model integrates credit risk models and accommodates endogenous cost of capital, providing a comprehensive framework for studying farm capital structure choice and its determinants. The results provide insights that could help policy makers and lenders develop effective instruments to manage, monitor, and influence the financial leverage of farms at different quantiles of debt ratio.

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