44 Pages Posted: 18 Mar 2009 Last revised: 4 May 2012
Date Written: May 3, 2012
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.
Keywords: Capital Structure, Pyramids, Multiple Shareholders
JEL Classification: G31, G32
Suggested Citation: 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