Title: Nonlinear relationship between institutional investors' ownership and capital structure: evidence from Iranian firms
Authors: Majid Ashrafi
Addresses: Department of Accounting, Islamic Azad University, Aliabad Katoul Branch, Aliabad Katoul, Iran
Abstract: The main objective of this study is to examine how institutional investors and different types of them influence the firms' capital structure. Using a panel data including 240 the main market Iranian firms from 2012 to 2016, the results of this study show that there is a nonlinear relationship between institutional ownership and capital structure. First, we look for a quadratic relationship but we did not find any evidence to support it. Further, we test for a cubic association in the next stage. The results reveal a cubic relationship between institutional ownership and capital structure but this association is different for different types of institutional investors. Pressure-sensitive institutions have positive, negative and again positive influence; while inversely pressure-insensitive institutions have a negative, positive and again negative impact on debt ratio in different levels of their ownership.
Keywords: capital structure; nonlinear relationship; Tehran Stock Exchange; institutional investors.
DOI: 10.1504/IJMFA.2019.097827
International Journal of Managerial and Financial Accounting, 2019 Vol.11 No.1, pp.1 - 19
Received: 17 May 2018
Accepted: 14 Sep 2018
Published online: 13 Feb 2019 *