The Research of the Nonlinear Relationship between Institutional Ownership and Capital Structure

Institutional investors impacting the capital structure of listed companies is an indisputable fact. However, previous studies using the linear method come to different conclusions. In this paper, using the 2006-2008 A-share listed data of China we find that: in current and lagged one year, the relationship between institutional ownership and capital structure of listed companies are non-linear and a reversed N-type. Institutional investors impact the capital structure both in the current and lagged year with a reversed N-type relationship. The study of institutional investors unified the differences in other researches, and helps to know the real relationship between institutional ownership and the capital structure.