Managerial opportunism and the capital structure decisions of property companies Available to Purchase

The focus of this paper is on the problem of managerial opportunism in the corporate governance of UK quoted property companies. Agency conflicts exist between firm managers and owners because of the separation of ownership from management. Consequently, managers pursue activities that enhance their interests rather than that of the shareholders’. The empirical investigation of this paper is divided into two sections. The first part examines the ownership structure of 83 UK quoted property companies between 1989 and 1995, revealing that close to a quarter of the common shares issued by the companies are held by the managers. The gap between ownership and management appears to increase with firm size, risk and growth rate but decrease with corporate performance. In the second section, logit modeling is employed to examine 110 security issues of the companies during the study period. The evidence shows that ownership structure has an influence on the debt‐equity choice of property companies. Consistent with the findings of previous studies, the study also reveals that the capital structure choice is dictated to a large extent by company size, issue size, and condition of the security market. The empirical analysis also suggests that property companies make their financing decisions as though they have a target capital structure in mind.