Managerial incentives and corporate leverage: Evidence from the United Kingdom

Aydin Ozkan, Chrisostomos Florackis

Research output: Contribution to journalArticle

26 Citations (Scopus)

Abstract

This paper investigates the effect of managerial incentives and corporate governance on capital structure using a large sample of UK firms during the period 1999-2004. The analysis revolves around the view that managerial incentives are important in determining a firm's leverage. However, we argue that the exact impact of these incentives on leverage is likely to be determined by firm-specific governance characteristics. To conduct our investigation, we construct a simple corporate governance measure using detailed ownership and governance information. We present evidence of a significant non-monotonic relationship between executive ownership and leverage. There is also strong evidence suggesting that corporate governance practices have a significant impact on leverage. More importantly, the results reveal that the nature of the relation between executive ownership and leverage depends on the firm's corporate governance structure.

LanguageEnglish
Pages531-553
Number of pages23
JournalAccounting and Finance
Volume49
Issue number3
DOIs
Publication statusPublished - 1 Sep 2009
Externally publishedYes

Fingerprint

Leverage
Managerial incentives
Corporate governance
Ownership
Governance
Capital structure
Incentives
Governance structure

Cite this

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Managerial incentives and corporate leverage : Evidence from the United Kingdom. / Ozkan, Aydin; Florackis, Chrisostomos.

In: Accounting and Finance, Vol. 49, No. 3, 01.09.2009, p. 531-553.

Research output: Contribution to journalArticle

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