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The Role of Investment, Financing and Dividend Decisions in Explaining Corporate Ownership Structure: Empirical Evidence from Spain


  • We thank an anonymous referee, Rafel Crespi, Isabel Gallego, Marc Goergen, Josep Tribo and participants at the 2005 EFMA Corporate Governance Symposium for helpful comments and suggestions. We are grateful to the research agency of the Spanish Government, DGI (Project SEJ2004-06627) and the Junta de Castilla y Leon (Project SA079A05) for financial support. We are solely responsible for any possible remaining errors. Corresponding author: Julio Pindado.


This paper analyses the determinants of ownership structure by focusing on the role played by investment, financing and dividend decisions. The use of the Generalised Method of Moments allows us to provide new evidence on this important corporate governance topic, since it controls for the endogeneity problem. Our most relevant findings show that: i) increases in debt lead insiders to limit the risk they bear by reducing their holdings; ii) monitoring by large outside owners substitutes for the disciplinary role of debt; and iii) both inside and outside owners are encouraged to increase their stakes in the firm in view of higher dividends. Our results hold after controlling for equity issues and share repurchases.