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)
Abstract
Abubakar Nasidi Dalladi
Department of Accounting,
Bayero University, Kano
adnasidi@gmail.com
08034024306

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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