Disentangling the driving force of pyramidal firms' capital structure: a new perspective
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.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 27 (2010)
Issue (Month): 3 (August)
|Contact details of provider:|| Web page: http://www.emeraldinsight.com|
|Order Information:|| Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK|
Web: http://emeraldgrouppublishing.com/products/journals/journals.htm?id=sef Email:
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-92, July.
- Cronqvist, Henrik & Nilsson, Mattias, 2000.
"Agency Costs of Controlling Minority Shareholders,"
SSE/EFI Working Paper Series in Economics and Finance
364, Stockholm School of Economics, revised 06 Jun 2000.
- Fan, Joseph P. H. & Wong, T. J., 2002. "Corporate ownership structure and the informativeness of accounting earnings in East Asia," Journal of Accounting and Economics, Elsevier, vol. 33(3), pages 401-425, August.
- Chin-Bun Tse & Joanne Ying Jia, 2007. "The impacts of corporate ownership structure on the incentive of using capital structure to signal," Studies in Economics and Finance, Emerald Group Publishing, vol. 24(2), pages 156-181, June.
- Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
- Pomerleano, Michael, 1998. "The East Asia crisis and corporate finances : the untold micro story," Policy Research Working Paper Series 1990, The World Bank.
- Joshua Abor, 2008. "Agency theoretic determinants of debt levels: evidence from Ghana," Review of Accounting and Finance, Emerald Group Publishing, vol. 7(2), pages 183-192, May.
- Kim, Wi Saeng & Sorensen, Eric H., 1986. "Evidence on the Impact of the Agency Costs of Debt on Corporate Debt Policy," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(02), pages 131-144, June.
- Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 1998.
"Corporate Ownership Around the World,"
Harvard Institute of Economic Research Working Papers
1840, Harvard - Institute of Economic Research.
- Stijn Claessens & Simeon Djankov & Joseph P. H. Fan & Larry H. P. Lang, 2002. "Disentangling the Incentive and Entrenchment Effects of Large Shareholdings," Journal of Finance, American Finance Association, vol. 57(6), pages 2741-2771, December.
- Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
- Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
- Driffield, Nigel & Pal, Sarmistha, 2001. "The East Asian crisis and financing corporate investment: is there a cause for concern?," Journal of Asian Economics, Elsevier, vol. 12(4), pages 507-527.
- Eugene F. Fama, 2002.
"Testing Trade-Off and Pecking Order Predictions About Dividends and Debt,"
Review of Financial Studies,
Society for Financial Studies, vol. 15(1), pages 1-33, March.
- Eugene F. Fama & Kenneth R. French, . "Testing Tradeoff and Pecking Order Predictions about Dividends and Debt.”," CRSP working papers 506, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Marianne Bertrand & Paras Mehta & Sendhil Mullainathan, 2000.
"Ferreting Out Tunneling: An Application to Indian Business Groups,"
NBER Working Papers
7952, National Bureau of Economic Research, Inc.
- Marianne Bertrand & Paras Mehta & Sendhil Mullainathan, 2002. "Ferreting Out Tunneling: An Application To Indian Business Groups," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 121-148, February.
- Harris, Milton & Raviv, Artur, 1990. " Capital Structure and the Informational Role of Debt," Journal of Finance, American Finance Association, vol. 45(2), pages 321-49, June.
- Heitor V. Almeida & Daniel Wolfenzon, 2006. "A Theory of Pyramidal Ownership and Family Business Groups," Journal of Finance, American Finance Association, vol. 61(6), pages 2637-2680, December.
- Barclay, Michael J & Smith, Clifford W, Jr, 1995. " The Maturity Structure of Corporate Debt," Journal of Finance, American Finance Association, vol. 50(2), pages 609-31, June.
- Julan Du & Yi Dai, 2005. "Ultimate Corporate Ownership Structures and Capital Structures: evidence from East Asian economies," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(1), pages 60-71, 01.
- L. Randall Wray & Stephanie Bell, 2004. "Introduction," Chapters, in: Credit and State Theories of Money, chapter 1 Edward Elgar.
- Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- DeAngelo, Harry & Masulis, Ronald W., 1980. "Optimal capital structure under corporate and personal taxation," Journal of Financial Economics, Elsevier, vol. 8(1), pages 3-29, March.
- Perotti, Enrico C. & Gelfer, Stanislav, 2001. "Red barons or robber barons? Governance and investment in Russian financial-industrial groups," European Economic Review, Elsevier, vol. 45(9), pages 1601-1617, October.
- de Miguel, Alberto & Pindado, Julio, 2001. "Determinants of capital structure: new evidence from Spanish panel data," Journal of Corporate Finance, Elsevier, vol. 7(1), pages 77-99, March.
- Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September.
- Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
- Jung, Kooyul & Kwon, Soo Young, 2002. "Ownership structure and earnings informativeness: Evidence from Korea," The International Journal of Accounting, Elsevier, vol. 37(3), pages 301-325.
When requesting a correction, please mention this item's handle: RePEc:eme:sefpps:v:27:y:2010:i:3:p:195-210. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.