Table of Contents
Economics Research International
Volume 2012, Article ID 465265, 12 pages
Research Article

Ownership Structure, Financial Decisions, and Institutional Setting: An International Analysis through Simultaneous Equations

1Facultad de CC. EE. y Empresariales, Universidad de Valladolid, 47011 Valladolid, Spain
2School of Business & Economics, University of Valladolid, Avda. Valle del Esgueva, 6, 47011 Valladolid, Spain

Received 2 April 2012; Revised 3 July 2012; Accepted 5 July 2012

Academic Editor: Evžen Kočenda

Copyright © 2012 Félix J. López-Iturriaga and Juan Antonio Rodríguez-Sanz. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.


We analyze the mutual relations among firms’ capital structure, ownership structure, and valuation. Through the estimation of a system of simultaneous equations for a sample of 1,130 firms from 16 countries from both the common law and the civil law environments, our results confirm the differential effect of ownership structure on firms’ value in each setting. Whereas in civil law firms the higher ownership concentration results in an entrenchment and an alignment effect, in the common law firms higher ownership concentration increases the value of the firm. Second, we corroborate the endogeneity of ownership structure since we find that ownership structure is affected by the value of the firm and by the capital structure. Third, our results suggest that corporate finance decisions are taken simultaneously with other mechanisms of corporate governance and conditional on firms’ valuation.