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Simultaneous Determination of Insider Ownership, Debt, and Dividend Policies

Published online by Cambridge University Press:  06 April 2009

Gerald R. Jensen ,
Donald P. Solberg  and
Thomas S. Zorn
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Abstract

We examine the determinants of cross-sectional differences in insider ownership, debt, and dividend policies. These policies are related not only directly, but also indirectly, through their relationship with operating characteristics of firms. To distinguish these effects, we examine the determinants of the three policy choices within a system of equations. Our empirical results support the hypothesis that levels of insider ownership differ systematically across firms. Further, high insider ownership firms choose lower levels of both debt and dividends. Finally, the effects of profitability, growth, and investment spending on debt and dividend policy support a modified “pecking order” hypothesis.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 27 , Issue 2 , June 1992 , pp. 247 - 263
Copyright
Copyright © School of Business Administration, University of Washington 1992

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