Dissertation: The Capital Structure Puzzle – The Role of Institutional Owner Ship with a Particular Focus on Times of Financial Turmoil

How did you become interested in your area of research?

I developed a passion for finance topics during my undergraduate studies. That is why I specialised in company valuation in my consulting work. The existing literature had previously focused mainly on the classic capital structure theories, such as the trade-off theory or the pecking order theory. These were used to derive company-specific determinants such as profitability, growth or business risk, which influence the company's value. However, there was still insufficient knowledge regarding the influence of institutional shareholders. This research gap formed the basis for my dissertation.

What is the focus of your doctoral thesis?

My thesis deals with the question of the extent to which institutional investors influence the capital structure (in particular the level of debt) of companies and thus the value of the company. It also deals with heterogeneity between investor types, their interaction, changes in times of crisis and macroeconomic influences.

What are the most important findings of your doctoral thesis?

We were able to show empirically that institutional investors have a negative influence on the capital structure of companies. Based on this result, it could be deduced within the framework of the theoretical construct of the principal-agent theory and the free cash flow theory that these shareholders have an important function in monitoring management. However, the effect is not the same for all investor types and there are differences between financial systems and in times of crisis. The significant contribution of institutional investors to monitoring management is also evident from their positive influence on enterprise value.

Are there any results or discoveries that particularly surprise you?

We have experienced two major surprises. In our first study, we found that banks have increased their monitoring activity, particularly after the financial crisis. Our result thus shows that banks make a valuable contribution to monitoring management and managing crises. This is a very important finding, as European banks are the focus of increasing regulation. In the future, policy discussions should therefore take into account that tighter regulation could also have negative economic consequences. Furthermore, in our fourth and final study, we found that institutional investors also perform a monitoring function in small and medium-sized enterprises (SMEs). This was unexpected, as many of these SMEs are managed and monitored by families over generations.

How relevant are the results of your work for your professional future?

First of all, my dissertation project has significantly expanded my theoretical knowledge of company valuation. In addition, the quantitative focus of the work has allowed me to sharpen my analytical skills. I can put the specialised knowledge I have learned to excellent use in my practical consulting work. Last but not least, my language skills have improved again, as the dissertation was written entirely in English.