Abstract

The objective of this article is to determine the interrelations between the ownership structure and the financial
policy as well as the relationship between the managerial ownership and the performance of the firm. This study
examines the relationship between the ownership structure and the performance when the managerial ownership
is modeled as en endogenous variable. The regressions results show that all the shareholders regardless their
types (manager, blockholder or institutional) do not tend to hold substantial ownership in the high levered firms
because of the high bankruptcy risk. The non linear relationship between the managerial ownership and the
performance of the firm strengthens the earlier US studies showing that some levels of the managerial ownership
are not beneficial to the shareholders’ wealth. The results of the simultaneous equations show that the entrenched
managers avoid the debt in order to escape the performance pressure and to protect their non diversifiable human
capital.

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