Abstract

http://ssrn.com/abstract=733183
 
 

Citations



 


 



Pyramidal Groups and Debt


Magda Bianco


Bank of Italy

Giovanna Nicodano


University of Turin - Department of Economics and Statistics; Collegio Carlo Alberto


European Economic Review, Forthcoming

Abstract:     
This paper suggests that debt should be raised by subsidiaries in order to exploit the limited liability of the holding company. However, when this behavior increases the cost of funds, the holding might prefer to raise debt to a point where it would also default when subsidiaries are insolvent.

After accounting for standard controls, we find that holding companies in Italian pyramids have higher leverage than subsidiaries and that the cash flow share of the entrepreneur in the subsidiary does not play a significant role. These findings are consistent with the implications of our model of group capital structure.

Accepted Paper Series


Not Available For Download

Date posted: May 6, 2006  

Suggested Citation

Bianco, Magda and Nicodano, Giovanna, Pyramidal Groups and Debt. European Economic Review, Forthcoming. Available at SSRN: http://ssrn.com/abstract=733183

Contact Information

Magda Bianco (Contact Author)
Bank of Italy ( email )
Via Nazionale 91
Rome, 00184
Italy
Giovanna Nicodano
University of Turin - Department of Economics and Statistics ( email )
Turin, 10134
Italy
HOME PAGE: http://www.carloalberto.org/people/faculty/fellows/nicodano/
Collegio Carlo Alberto ( email )
via Real Collegio 30
Moncalieri, Torino 10024
Italy
390116705006 (Phone)
HOME PAGE: http://www.carloalberto.org/people/nicodano/
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