Impact of Ownership Structure on Capital Structure: A Study of Corporate Financing of Manufacturing Companies in Malaysia
Ahmad Ibn Ibrahimy, Aifa Afilla Binti Aidi

Abstract
In this study, ownership structure, namely managerial shareholdings, largest shareholdings and institutional shareholdings are considered to be the main factors in deciding the sources of fund available to the firm. Relying on fixed effect panel data regression estimation of 46 manufacturing companies under Bursa Malaysia, we found a negative relationship between managerial shareholdings and capital structure, reflecting the choice of equity financing than debt financing of lower managerial shareholdings where the systematic risk of debt to the management is higher. This result also supports the pecking order theory. In contrast, as external block holders, largest and institutional shareholdings have a positive relationship with capital structure, indicating the role of financing decision taken by these investors to issue more debt that reduces the conflicts of interest between managers and shareholders. Additionally, firm’s size and earnings are significantly negatively correlated with capital structure by fixed effect estimators.

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