경영자지분과 부채수준 사이의 대체효과와 기업의 한계세율 = The Substitution Effect Between Managerial Ownership and Debt Level, and the Firms` Marginal Tax Rate

다국어 초록 (Multilingual Abstract)

When managerial actions are not observable and when managers own only a fraction of the firm`s common stock, they may take self-interest maximizing actions, and this can give rise to agency costs of stockholders` equity. Many theoretical or empirical studies in the area of corporate finance have shown that managerial ownership and debt are alternative measures to reduce the agency costs of stockholders` equity, and so, there is substitution effect between managerial ownership and debt level. In other words, as the level of debt and the attendant disciplining effect increases, investors could offer lower levels of managerial ownership; conversely, as the level of managerial ownership and the attendant alignment effect increases, firms could utilize lower levels of debt. As an extension of the previous studies on the substitution effect between managerial ownership and debt level, Seetharaman et al.(2001) expects that the degree of managerial ownership`s being low for high level is strong at low marginal tax rates but gets progressively weaker at higher marginal tax rates, and provides empirical evidence supporting the expectation. But the study does not capture the moderating effect of marginal tax rate on managerial ownership in clear distinction from the main effect of it. In addition, it is probable that managerial ownership and debt level are interrelated, and so, they can be determined endogenously by exchanging effect with each other. In that case, the ordinary least-squares regression analysis will result in biased or inconsistent parameter estimates. Noting this point, empirical study on the substitution effect between managerial ownership and debt level needs to be done by setting as dependent variable not only managerial ownership but also debt level. And it is needed to investigate whether the substitution effect between the two comes from unidirectional or bidirectional causality by performing two-stage least-squares regression analysis. So many foreign studies have been done to test empirically the interrelation between managerial ownership and debt level, and in Korea also, there have been a few empirical studies on that issue. But they do not take it into account that marginal tax rate affects debt level. On the contrary, some recent studies have provided empirical evidence that marginal tax rate affects debt level, but they do not take it into account that there is substitution effect between managerial ownership and debt level. Moreover, there is still no empirical study in Korea investigating whether the substitution effect between managerial ownership and debt level is different by the size of marginal tax rate. By improving the aforementioned limitations o existing studies, this paper investigates for the KSE-listed companies whether there is substitution effect between managerial ownership and debt level and the substitution effect is different by the size o marginal tax rate, by setting as dependent variable not only managerial ownership but also debt level. And this paper tries to capture the moderating effect of marginal tax rate in clear distinction from the main effect of it. In addition, it is tested whether the substitution effect between the two is due to unidirectional or bidirectional causality by performing two- stage least-squares regression analysis. Main test results are as follows. First, there is substitution effect between managerial ownership and debt level. In other words, managerial ownership is low for high debt level, and debt level is low for high managerial ownership. Second, the degree of debt level`s being low for high managerial ownership is stronger for high-MTR(marginal tax rate) firms than for low-MTR firms. Third the substitution effect between managerial ownership and debt level is due to bidirectional causality, and the causality in the direction of (managerial ownership→debt level) is more significant than that in the direction of (debt level→managerial ownership). Some recent empirical studies have shown that marginal tax rate affects debt level, but they do not take it into account that there is substitution effect between managerial ownership and debt level. On the other hand, there have been empirical studies showing that there is substitution effect between managerial ownership and debt level, but they do not take it into account that marginal tax rate affects debt level. This paper contributes to the existing literature by showing that there is substitution effect between managerial ownership and debt level and the substitution effect is different by the size of marginal tax rate, taking it into consideration that marginal tax rate affects debt level.

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