Managerial Ownership, Financial Policy and Corporate Performance
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The objective of this paper is to examine the possible relationships between the ownership structure and the leverage on one side and the impact of the managerial ownership on the corporate performance, on the other. In fact, this paper determines the impact of the ownership structure and more particularly the managerial ownership on the financial leverage. The empirical results show that all the shareholders (managers, blockholders or institutionals) are not motivated in holding important ownership in the high levered firms because of the bankruptcy risk. The results show also that the relationship between the managerial ownership and the corporate performance is nonlinear confirming the results of the previous studies showing that, at some levels of ownership, the managerial entrenchment affects negatively the performance of the firm. However, the empirical results of the simultaneous equations show that the entrenched managers don’t prefer the debt in financing the projects in order lighten the market pressure and protect their non-diversifiable human capital.