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Complex Ownership and Capital Structure

Teodora Paligorova

Bank of Canada

Zhaoxia Xu

New York University

May 3, 2012

Journal of Corporate Finance Forthcoming

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

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Date posted: March 18, 2009 ; Last revised: May 4, 2012

Suggested Citation

Paligorova, Teodora and Xu, Zhaoxia, Complex Ownership and Capital Structure (May 3, 2012). Journal of Corporate Finance Forthcoming. Available at SSRN: https://ssrn.com/abstract=1362249 or http://dx.doi.org/10.2139/ssrn.1362249

Contact Information

Teodora Paligorova
Bank of Canada ( email )
Ottawa, Ontario K1A 0G5
Zhaoxia Xu (Contact Author)
New York University ( email )
New York, NY 11201
United States

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