One of the largest US public pension funds has recently been critical of firms entrenching managers through mechanisms such as a dual-class share ownership structure. For example, in 2018 Mark Zuckerberg commanded an unassailable voting power over Facebook despite owning approximately 16% of outstanding shares.

(a) Provide an overview of normative and managerialist agency models of capital structure, with a particular focus on Zweibel (1996), and critically evaluate these agency models.

(b) At the time of writing, Facebook has a considerably lower level of debt than other firms operating in the same industry. To what extent does this observation support (or conflict with) existing empirical studies investigating the relationship between a firms level of managerial entrenchment and its leverage ratio?