The Impact of Ownership Structure on Capital Structure of Listed Building Materials Companies in Nigeria

AFRAG043

The Impact of Ownership Structure on Capital Structure of Listed Building Materials Companies in Nigeria Maimuna Adamu Salihu,

Department of Accounting, Bayero University, Kano msalihu.acc@buk.edu.ng 08037054198

Zaharaddeen Salisu Maigoshi Department of Accounting, Bayero University, Kano zsmaigoshi.acc@buk.edu.ng 08067416696

(Corresponding author)

Abubakar Nasidi Dalladi Department of Accounting,

Bayero University, Kano adnasidi@gmail.com 08034024306

Abstract

This study examined the impact of ownership structure on capital structure using the data from the sampled Building Material Industry companies listed on the Nigerian Stock Exchange. Regression analysis was run to determine the level of impact of ownership structure on capital structure surrogated by managerial ownership, institutional ownership and block-holder ownership on the capital structure epitomized by Debt to equity ratio. The analysis revealed that the three variables under investigation managerial, institutional and block holder ownerships have significant positive, negative and positive impact on capital structure. The findings of the study contribute to the agency theory and tradeoff theory by documenting that external monitoring mechanisms (debt providers) can be substituted with institutional investors. This indicates that highly geared firms can leverage their external financing need through seeking for institutional investors thereby, meeting their both financing and monitoring needs. In an organizational setting that presents an opportunity for insiders (managers or block holder owners) to expropriate the wealth of the firm at the expense of outsiders, the findings of the study show that debt financing can be used to minimize the agency costs. The study recommends that the management of the listed firms in the industry should balance a proper trade-off between debt and equity to reduce the risk of over burden external financing so as to increase the value of the firms for the benefit of equity holders.

Keywords: Ownership structure, Capital structure, Equity and Debt

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