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Disentangling the driving force of pyramidal firms' capital structure: a new perspective

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  • A.N. Bany‐Ariffin

Abstract

Purpose - The purpose of this paper is to disentangle the driving force of pyramidal firms' capital structure from nine East Asian economies. Design/methodology/approach - To disentangle the driving force, this paper develops a new theoretical framework for the pyramidal firms'. Using panel regression, the new theoretical framework is tested on a set of 1,433 pyramidal firms covering a period from 1992 to 1997. Findings - The regression results reveal that the separation of cash flow rights and control rights in the pyramidal firms have led to high usage of leverage for the purpose of preserving the ultimate owners' (UO) dominance in the pyramidal firms that he or she controls. Based on the findings, the study concludes that the actual driving force of the pyramidal firms' capital structure is the UO non‐dilution entrenchment motive. Originality/value - The main contribution of this paper is the new theoretical framework developed which enable us to disentangle the driving force behind pyramid firm's capital structure.

Suggested Citation

  • A.N. Bany‐Ariffin, 2010. "Disentangling the driving force of pyramidal firms' capital structure: a new perspective," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 27(3), pages 195-210, August.
    • Handle: RePEc:eme:sefpps:v:27:y:2010:i:3:p:195-210
    DOI: 10.1108/10867371011060027
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    Cited by:

    1. Bolaji Tunde Matemilola & Bany-Ariffin A. N. & Annuar Md. Nassir, 2018. "Interaction Effects of Country-Level Governance Quality and Debt on Stock Returns in Developing Nations," Capital Markets Review, Malaysian Finance Association, vol. 26(1), pages 19-35.
    2. Matemilola, Bolaji Tunde & Bany-Ariffin, A.N. & Azman-Saini, W.N.W. & Nassir, Annuar Md, 2019. "Impact of institutional quality on the capital structure of firms in developing countries," Emerging Markets Review, Elsevier, vol. 39(C), pages 175-209.
    3. Matemilola, B.T. & Bany-Ariffin, A.N. & Azman-Saini, W.N.W. & Nassir, Annuar Md, 2018. "Does top managers’ experience affect firms’ capital structure?," Research in International Business and Finance, Elsevier, vol. 45(C), pages 488-498.

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