Agency theoretic determinants of debt levels: evidence from Ghana

Agency theoretic determinants of debt levels: evidence from Ghana Purpose – The purpose of this study is to examine the relationship between agency factors and the debt level of Ghanaian small and medium enterprises (SMEs). Design/methodology/approach – Generalized least squares model is used to estimate the regression equation. Findings – The results indicate that managerial ownership is negatively related to debt level. This suggests that SMEs with insider shareholders may prefer lower leverage to reduce the risk of insolvency. The results also show that SMEs with many shareholders are less likely to employ debt finance. Firms with many shareholders are not likely to entertain the fear of loss of control since the firm is seen as group‐owned. Originality/value – The findings of this study generally suggest that managerial ownership is important in explaining the capital structure of Ghanaian SMEs. This study extends our understanding of the agency theory and the capital structure of SMEs from the Ghanaian context. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting and Finance Emerald Publishing

Agency theoretic determinants of debt levels: evidence from Ghana

Review of Accounting and Finance, Volume 7 (2): 10 – May 16, 2008

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Publisher
Emerald Publishing
Copyright
Copyright © 2008 Emerald Group Publishing Limited. All rights reserved.
ISSN
1475-7702
DOI
10.1108/14757700810874146
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this study is to examine the relationship between agency factors and the debt level of Ghanaian small and medium enterprises (SMEs). Design/methodology/approach – Generalized least squares model is used to estimate the regression equation. Findings – The results indicate that managerial ownership is negatively related to debt level. This suggests that SMEs with insider shareholders may prefer lower leverage to reduce the risk of insolvency. The results also show that SMEs with many shareholders are less likely to employ debt finance. Firms with many shareholders are not likely to entertain the fear of loss of control since the firm is seen as group‐owned. Originality/value – The findings of this study generally suggest that managerial ownership is important in explaining the capital structure of Ghanaian SMEs. This study extends our understanding of the agency theory and the capital structure of SMEs from the Ghanaian context.

Journal

Review of Accounting and FinanceEmerald Publishing

Published: May 16, 2008

Keywords: Debts; Capital structure; Ghana; Small to medium‐sized enterprises; Owner‐managers; Family firms

References

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