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Complex Ownership and Capital StructureTeodora PaligorovaBank of Canada Zhaoxia XuPolytechnic Institute of New York University May 3, 2012 Journal of Corporate Finance Forthcoming Abstract: This paper explores pyramidal firms and their motivations for the use of debt financing. We find that pyramids have significantly higher leverage than non-pyramids and that the use of debt in pyramids is associated with the risk of expropriation. We do not find evidence for the control-enhancing, disciplining, tax-reduction, and risk-sharing explanations for the use of debt financing. Our results indicate that the capital structure of pyramids is affected by the expropriation activities of ultimate owners that have excess control rights.
Number of Pages in PDF File: 44 Keywords: Capital Structure, Pyramids, Multiple Shareholders JEL Classification: G31, G32 Accepted Paper SeriesDate posted: March 18, 2009 ; Last revised: May 4, 2012Suggested Citation |
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