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Complex ownership and capital structure

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  • Paligorova, Teodora
  • Xu, Zhaoxia
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    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.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0929119912000466
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 18 (2012)
    Issue (Month): 4 ()
    Pages: 701-716

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    Handle: RePEc:eee:corfin:v:18:y:2012:i:4:p:701-716

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    Web page: http://www.elsevier.com/locate/jcorpfin

    Related research

    Keywords: Capital structure; Pyramids; Multiple shareholders;

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    Cited by:
    1. Abigail S. Hornstein, 2013. "The Impact of Local Governance Institutions on Foreign Market Listings: The Case of Chinese Firms," Wesleyan Economics Working Papers 2013-006, Wesleyan University, Department of Economics.
    2. Byun, Hae-Young & Choi, Sunhwa & Hwang, Lee-Seok & Kim, Robert G., 2013. "Business group affiliation, ownership structure, and the cost of debt," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 311-331.

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