Investigating the Effect of Managerial Ownership Thresholds on Capital Structure and Dividend Policy in Companies on The Tehran Stock Exchange

Subject Areas : Financial engineering

mehrdad rafizadeh ¹ , hamidreza kordlouie ² , Mohsen Hashemighohar ³ , Shadi Shahverdiani ⁴

1 - Department of Financial Engineering, Shahr-E-Qods Branch, Islamic Azad University, Tehran, Iran.
2 - Department of Financial Management, Islamshahr Branch (Quds City Branch), Islamic Azad University, Islamshahr, Iran and member of Modern Financial Risk Research Group
3 - Department of Accounting, Shahre Qods Branch, Islamic Azad University, Tehran, Iran
4 - Department of Financial management,Islamic Azad University,Shahr-e-Qods Branch, Tehran, Iran

Received: 2022-03-08 Accepted : 2022-04-11 Published : 2023-03-21

Keywords: Financial Leverage, Managerial Ownership, dividends paid, Ownership threshold, behavioral regime,

Abstract :

Representation theory refers to managers' equity, financial leverage, and dividends as tools used to reduce the agency dilemma. Ownership of managers, although it causes their interests to align with shareholders, but on the other hand also leads to the fortification of managers or their conservative behavior. In fact, managers with different levels of ownership act differently in other financial decisions such as the use of financial leverage and dividends. The aim of the present study is to find out the effect of managers' shareholding thresholds, in which their behavior in dividend and financial leverage decisions differs before and after. In this study,143 companies have been selected in the period 1392-1392. The research findings show that the effect of managers' ownership on financial leverage is based on two values ​​of ownership thresholds and consequently three different behavioral regimes for financial leverage.In the first and second behavioral regimes, managerial ownership has positive and significant effects on financial leverage. Regarding the effect of managerial ownership on dividends paid, a threshold value has been identified that in both regimes, the effect of managerial ownership on dividends paid is positive and significant, but in high values ​​of thresholds, the effect coefficient shows a significant increase.