Influence of Ownership Structure on the Capital structure of manufacturing


Aim: The main aim of the current research is to examine the impact of ownership structure on the capital structure of manufacturing firms in the United Kingdom.

Method: The study adopted a secondary quantitative methodology in which data for total assets (indicating firm size), debt-to-equity ratio (indicating capital structure), family ownership, ownership concentration, and institutional ownership of ten manufacturing organisations were selected for the period of 2018-2020 from publicly available sources. The data was statistically analysed through descriptive tests, correlation analysis, and fixed effect GLS test.

Download full abstract text


In the contemporary business world, innovation in terms of financial management is one of the core strategies for achieving financial sustainability and growth for any organisation. Capital structure is the method through which a company determines the right balance of stock and debt financing to maximise profits while minimising exposure to risk (Musallam et al., 2020; Khaw, 2019). Due to its significance, the capital structure has been seen as an essential part of any company’s approach to financing. According to Kumar et al. (2017), a firm’s capital structure decision is crucial because it affects the company’s ability to compete in a highly competitive market and because stakeholders in the company stand to benefit financially from the decision. There has been a lot of research into how capital structure affects a company’s bottom line.

The literature demonstrates that an effective capital structure can increase a company’s worth. However, in contexts with varying economic, legal, and institutional norms, the capital structure can take various shapes due to a number of influencing factors. One aspect that affects the manner in which a company is financed is its structure of ownership (Kumar et al., 2017). According to Muchtar et al. (2018), the establishment of debt to equity ratio generates financial risk, which is the additional risk beyond the business risk of the manufacturing firm. Even though capital leverage has a marginal influence on the cost of capital available to a firm, above a certain limit, its influence may become significant due to the firm’s aggravating risk complexion. (Brahmana et al., 2019).

Download full article


Azungah, T. (2018). Qualitative research: deductive and inductive approaches to data analysis. Qualitative research journal.

Babones, S. (2016). Interpretive quantitative methods for the social sciences. Sociology50(3), pp.453-469.

Bae, J., Kim, S.-J., and Oh, H. (2017). Taming polysemous signals: The role of marketing intensity on the relationship between financial leverage and firm performance. Review of Financial Economics, 33, 29-40.

Bajagai, R. K., Keshari, R. K., Bhetwal, P., Sah, R. S., and Jha, R. N. (2019). Impact of Ownership Structure and Corporate Governance on Capital Structure of Nepalese Listed Companies. In Business Governance and Society (pp. 399-419): Springer.

Download full list of references
Share At: