Theses and Dissertations - UTB/UTPA

Date of Award


Document Type


Degree Name

Doctor of Philosophy (PhD)


Business Administration

First Advisor

Dr. Jose A. Pagan

Second Advisor

Dr. H. Young Baek

Third Advisor

Dr. Cynthia Brown


The relationship between ownership structure and capital structure is one of the less understood areas within the corporate finance literature. This study attempts to address this issue within a unique; organizational and institutional framework that may help explain the intricacies of such a relationship. The Chilean corporate scene with its high ownership concentration levels, industrial group structure, and familial control provides a rich testing ground to analyze how ownership variables define a firm's leverage policy.

Research has supported both a positive and a negative relationship between ownership concentration and leverage levels. On the one hand, firms characterized by high levels of ownership concentration are expected to prefer debt to equity financing in order to avoid ownership dilution. However, high levels of ownership concentration imply lower levels of diversification on the part of managers/owners and, consequently, lower tolerance to high levels of debt in order to reduce the risk of the firm.

Within Chile, several variables are hypothesized to impact or moderate this relationship. The hypotheses developed in this study explore how family ownership, the business group structure, the issuance of dual-class shares, the use of pyramiding structures, and the ensuing effects on the agency costs of debt and equity help define the interaction between ownership variables, leverage, and debt maturity.

The empirical analysis follows 102 non-financial, non-utilities Chilean companies. After controlling for several determinants of capital structure, results reveal that family-controlled firms employ higher levels of debt than their non-family counterparts. Further analysis shows that debt is sought for its control function. In the presence of alternative control mechanisms, namely pyramiding structures, family firms utilize less debt. The agency perspective, which rests on the premise that family-owned businesses have lower incentive-related agency costs of debt, is strongly supported within the context of debt maturity choice; managerial involvement by family members results in less reliance on short-term debt. Other results show that group membership leads to lower levels of debt unless a bank is present within the group. No support is found for debt's governance role. Informational asymmetries significantly affect a firm's capital structure.


Copyright 2003 Suad Ghaddar. All Rights Reserved.

Granting Institution

University of Texas-Pan American