The Impact of Managerial Self-Interest on Corporate Capital Structure: (A Case of Selected Companies in Addis Ababa, Ethiopia)
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Date
2011-06
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Addis Ababa University
Abstract
The literature on the impact of managerial self-interest on capital structure has already
been developed in developed markets that have different institutional financing
arrangements from those in emerging markets. Therefore this requires a thorough
examination of the impact of managerial self-interest on corporate capital structure in
developing market. In addition, the study so far has been conducted on listed firms with
different proxies of managerial self-interest as indicators of capital structure.
This thesis deals with the impact of managerial self-interest on corporate capital
structure of eight selected companies in Addis Ababa. The study has examined the impact
of managerial self-interest on corporate capital structure using both qualitative and
quantitative methods of inquiry. Mainly the study focuses on the questionnaires analysis
so as to see the representative proxies of managerial self-interest such as, board
independence, managerial shareholding and institutional shareholding, on firms‟ capital
structure decision. In addition, performance, risk, company size and tangibility of assets
were regressed using ordinary least square (OLS) as a supportive variable in order to
compromise the possible deficiencies that might appear in questionnaire analysis. In its
main finding the result shows the inverse relationship between managerial shareholding
and capital structure in case of banks and manufacturing companies, and relatively
positive relationship in case of insurance companies under consideration. This is possibly
because of the presence of principal shareholders and management‟s attitude towards
maximizing the company‟s profit and obtaining tax benefits for employing long term debt
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Keywords
A case of selected companies in Addis Ababa; ethiopia