Ownership Structure as a Determinant of Capital Structure - An Empirical Study of DAX Companies

Table of Contents

1 INTRODUCTION

1.1 Problem and Objective of the Thesis

1.2 Organization of the Thesis

2 THE RELATIONSHIP BETWEEN CAPITAL STRUCTURE, MANAGEMENT OWNERSHIP AND EXTERNAL BLOCK HOLDERS – PRIOR RESEARCH AND HYPOTHESES

2.1 Capital Structure and Management Ownership

2.1.1 Incentive-Alignment Hypothesis

2.1.2 Signaling and Corporate Control Considerations

2.1.3 Management Entrenchment Hypothesis

2.1.4 Non-Linearity and Hypothesis Development

2.2 Capital Structure and External Block Holders

2.3 Interaction of Management Ownership and External Block Holders

3 ECONOMETRIC ANALYSIS OF OWNERSHIP AND CAPITAL STRUCTURE

3.1 Data and Model Specification

3.1.1 Sample Selection

3.1.2 Ownership Structure Variables

3.1.3 Measures of Capital Structure and Univariate Analysis

3.1.4 Additional Capital Structure Determinants

3.1.5 Variable Overview and Correlation Analysis

3.1.6 Multivariate Regression Models

3.2 Empirical Results and Theoretical Implications

3.2.1 Capital Structure and Management Ownership

3.2.2 Capital Structure and External Block Holders

3.2.3 Interaction of Management Ownership and External Block Holders

3.3 Robustness of Results

3.3.1 Multicollinearity, Heteroskedasticity and Non-Normality

3.3.2 Alternative Variable Definitions

3.3.3 Exclusion of Observations

4 CONCLUSION

4.1 Summary and Critique

4.2 Implications for Further Research

Objectives and Research Themes

This thesis examines the influence of ownership structure on the capital structure of German companies, specifically investigating how managerial share ownership and external block holders affect corporate leverage decisions. The primary goal is to address the lack of empirical evidence for Germany in this field and to contribute to the ongoing theoretical debate regarding agency theory perspectives on corporate financing.

• Impact of managerial equity ownership on corporate debt levels
• Influence of external block holders on a firm’s leverage
• Interaction effects between management and external block holders on capital structure
• Application of multivariate regression models to a sample of 95 German companies
• Examination of the non-linear relationship between ownership structure and debt ratios

Excerpt from the Book

Summary of Chapters

1 INTRODUCTION: Outlines the research problem regarding ownership structure's effect on capital structure and defines the thesis objectives in the context of German companies.

2 THE RELATIONSHIP BETWEEN CAPITAL STRUCTURE, MANAGEMENT OWNERSHIP AND EXTERNAL BLOCK HOLDERS – PRIOR RESEARCH AND HYPOTHESES: Discusses theoretical pillars, including agency theories, and develops hypotheses regarding management and block holder influences on leverage.

3 ECONOMETRIC ANALYSIS OF OWNERSHIP AND CAPITAL STRUCTURE: Details the data, regression models, and empirical findings, testing the developed hypotheses and performing robustness checks.

4 CONCLUSION: Summarizes the main empirical findings, discusses the significance of the results, and outlines potential areas for further research.

Keywords

Ownership Structure, Capital Structure, Management Ownership, External Block Holders, Agency Theory, Corporate Governance, Debt Ratios, Incentive-Alignment Hypothesis, Management Entrenchment Hypothesis, Econometric Analysis, Germany, DAX, Multivariate Regression, Risk Aversion, Corporate Finance

Frequently Asked Questions

What is the core focus of this thesis?

This thesis investigates how a firm's ownership structure, particularly the stakes held by management and external block holders, influences its capital structure decisions, using a sample of German companies.

Which theoretical frameworks are primarily utilized?

The study primarily utilizes agency theory, specifically examining the incentive-alignment hypothesis and the management entrenchment hypothesis to explain variations in firm leverage.

What is the main objective of this empirical study?

The primary objective is to contribute to the empirical debate by testing whether equity ownership structure can explain cross-sectional variation in capital structure, specifically focusing on the German market.

What research methods are employed in the analysis?

The author uses a multivariate regression approach on cross-sectional data, complemented by univariate analysis and various robustness tests to ensure the validity of the results.

What does the main body of the work cover?

The main body includes a thorough review of prior literature, the development of five specific hypotheses, detailed data and model specifications, and an empirical discussion of the regression results.

Which specific variables characterize the ownership structure in this study?

The study categorizes ownership into management (officers and supervisory board members) and external block holders, further refined by the size of stakes and the type of shareholder (financial, strategic, public).

How does the German institutional background influence the findings?

The thesis notes that unlike in the US, Germany has higher ownership concentration and significant involvement of banks as both shareholders and lenders, which is critical when interpreting the influence of block holders.

Why are technology firms excluded from the final sample?

Technology firms were excluded due to their youth, high volatility, and the impact of the stock market boom and crash on their capital structures, which could have masked the relationships being tested.