How does ownership structure affect capital structure and firm value? Recent evidence from East Asia

Nigel Driffield*, Vidya Mahambare, Sarmistha Pal

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

The present paper examines the effects of ownership structures on capital structure and firm valuation. It argues that the effects of separation of control from cash flow rights on capital structure and firm value also depend on the separation of control from management as well as on legal rules and enforcement defining investors' protection. We obtain firm-level panel data (three stage least squares, 3SLS) estimates from four of the East Asian countries worst affected by the last crisis. There is evidence that the general wisdom that higher control than cash flow rights may lower firm value may be reversed among owner-managed family firms in the sample countries. © 2007 The Authors Journal compilation © 2007 The European Bank for Reconstruction and Development.

Original languageEnglish
Pages (from-to)535-573
Number of pages39
JournalEconomics of Transition
Volume15
Issue number3
DOIs
Publication statusPublished - Jul 2007

Keywords

  • 3SLS estimates with error components
  • Asian crisis
  • capital structure firm value
  • corporate governance
  • owner managed family firms
  • separation of control and cash flow rights
  • separation of control and management
  • simultaneity bias

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