Influence of Institutional Investors in the Decisions of Capital Structure of the Company. Evidence for an Emerging Market

Abstract

This paper studies the influence of the AFPs, as major institutional investor, on the capital structure decision of the Chilean firm. These investors may influence the capital structure decision, through different avenues; monitoring the firm's managers and transferring useful information to the capital market. The study considers a sample of 109 Chilean public companies in the period 2009-2011. The APPs not only participate in the stock market but also in the bond market and therefore our results are new and relevant to explain how AFPs influence the capital structure decision. We find a positive relation between the participation of AFPs in the ownership structure of the firm and the leverage and it is also positively related to the public leverage.