ABSTRACT
This chapter investigates whether the ownership and the governance structure of firms affect the decision to raise funds, and subsequently the choice of financial instrument. We hypothesize that the choice of security to raise capital depends on the relative riskiness of the source of funds ranging from equity to debt finance including bonds, sukuk, or bank loans. By using an international sample of 1,565 firms from various countries: Malaysia, Indonesia, Singapore, and Pakistan from 2000 to 2015, we find support for control hypothesis whereby ownership concentration is associated with lower equity financing to avoid ownership dilution. The CEO duality also coincides with raising of external funds with low risk aversion. On the other hand, potential future growth and holding a higher proportion of liquid assets significantly influence firms in their decision to raise funds through equity financing. The results remained robust with an alternative estimation method.
