Managerial and Controlling Ownership, Profitability, Firm Size and Financial Leverage in Nigeria

An ordinary least squares regression test of sample of firms in manufacturing and services industries sorted into overall, low and high managerial and controlling interests (MCOWN), shows financial leverage (FL) as an increasing (decreasing) function of MCOWN, for firms with low (high) MCOWN and service (manufacturing) industry, and negatively (positively) related to profitability and size for firms with high (low) MCOWN. Result suggests increasing (decreasing) use of debt capital when MCOWN is low (high) and that the higher (lower) the MCOWN, the greater (lesser) the agency cost contradicting the notion that FL is a governance mechanism that mitigates agency problem