Capital structure, shareholder rights, and corporate governance

Pornsit Jiraporn, Kimberly C. Gleason

Research output: Contribution to journalArticlepeer-review

84 Scopus citations


We show how capital structure is influenced by the strength of shareholder rights. Our empirical evidence shows an inverse relation between leverage and shareholder rights, suggesting that firms adopt higher debt ratios where shareholder rights are more restricted. This is consistent with agency theory, which predicts that leverage helps alleviate agency problems. This negative relation, however, is not found in regulated firms (i.e., utilities). We contend that this is because regulation already helps alleviate agency conflicts and, hence, mitigates the role of leverage in controlling agency costs.

Original languageEnglish (US)
Pages (from-to)21-33
Number of pages13
JournalJournal of Financial Research
Issue number1
StatePublished - Mar 2007

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance


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