The Impact of Managerial Self Interest on Corporate Capital Structure: (A Case of Selected Companies in Addis Ababa, Ethiopia)
The literature on the impact of managerial self interest on capital structure has already been developed in developed markets that have different institutional financing arrangements from those in emerging markets. Therefore this requires a thorough examination of the impact of managerial self interest on corporate capital structure in developing market. In addition, the study so far has been conducted on listed firms with different proxies of managerial self interest as indicators of capital structure. This thesis deals with the impact of managerial self interest on corporate capital structure of eight selected companies in Addis Ababa. The study has examined the impact of managerial self interest on corporate capital structure using quantitative methods of inquiry. Mainly the study focuses on the questionnaires analysis so as to see the representative proxies of managerial self interest such as, board independence, managerial shareholding and institutional shareholding, on firms" capital structure decision. In addition, performance, risk, company size and tangibility of assets were regressed using ordinary least square (OLS) as a supportive variable in order to compromise the possible deficiencies that might appear in questionnaire analysis. In its main finding the result shows the inverse relationship between managerial shareholding and capital structure in case of banks and manufacturing companies, and relatively positive relationship in case of insurance companies under consideration. This is possibly because of the presence of principal shareholders and management's attitude towards maximizing the company's profit and obtaining tax benefits for employing long term debt.