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Complex ownership and capital structure

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  • Paligorova, Teodora
  • Xu, Zhaoxia

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.

Suggested Citation

  • Paligorova, Teodora & Xu, Zhaoxia, 2012. "Complex ownership and capital structure," Journal of Corporate Finance, Elsevier, vol. 18(4), pages 701-716.
    • Handle: RePEc:eee:corfin:v:18:y:2012:i:4:p:701-716
    DOI: 10.1016/j.jcorpfin.2012.05.001
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    More about this item

    Keywords

    Capital structure; Pyramids; Multiple shareholders;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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