Faculty Scholarship 1994 - Present

Determinants of Capital Structure, Dividend Policy, and Insider Ownership in Japanese Corporations

The relationship between a firm's operational characteristics on one hand and its managerial ownership, debt, and dividend policies on the other has received considerable attention in finance literature. The determinants of each policy are generally studied independently. However, the firm's managerial ownership, debt, and dividend levels are related not only to the firm's operational characteristics but also directly to each other. In this study, we use a three-stage least squares (3SLS) simultaneous equations model to study the interaction between the financial leverage, dividend policy, insider ownership decisions in Japanese nonfinancial corporations. We find that dividend policy, business risk and profitability are significant determinant of financial leverage; financial leverage, business risk, and profitability are significant determinants of dividend policy; and, institutional ownership and business risk are significant determinants of insider ownership in Japanese non-financial corporations. These findings are generally in line with earlier findings for U.S. non-financial corporations. However, there are some important differences.