DETERMINANTS OF CAPITAL STRUCTURE, DIVIDEND POLICY, AND INSIDER OWNERSHIP IN JAPANESE CORPORATIONS

Abstract

The relationship between a firms operational characteristics on one hand and its managerial ownership, debt, and dividend policies on the other has received considerable attentwn in finance literature. The determinants ofeach policy are generally studied independently. However. the firms managerial ownership, debt, and dividend levels are related not only to thejinns operational characteristics but also directly to each other. Jn this study, we use a three-stage least squares (3SLS) simultaneous equations model to study the interaction between rhe financial Leverage, dividend policy, insider ownership decisions in Japanese non- financial corpo:rrtions. We find that dividend policy, business risk and profitability are significant determinant of financial leverage; financial Leverage, business risk, and profitability are significant determinants ofdividend po/ic,y; 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 US non-financial corporations. However, there are some important d(fferences.

Keywords

• capital structure
• dividend policy
• insider ownership
• firms operational characteristic