Complex ownership and capital structure

Teodora Paligorova; Zhaoxia Xu

doi:10.1016/j.jcorpfin.2012.05.001

Complex ownership and capital structure

Teodora Paligorova, Zhaoxia Xu

Finance and Risk Engineering

Research output: Contribution to journal › Article › peer-review

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.

Original language	English (US)
Pages (from-to)	701-716
Number of pages	16
Journal	Journal of Corporate Finance
Volume	18
Issue number	4
DOIs	https://doi.org/10.1016/j.jcorpfin.2012.05.001
State	Published - Sep 2012

Keywords

Capital structure
Multiple shareholders
Pyramids

ASJC Scopus subject areas

Business and International Management
Finance
Economics and Econometrics
Strategy and Management

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10.1016/j.jcorpfin.2012.05.001

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AB - 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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Complex ownership and capital structure

Abstract

Keywords

ASJC Scopus subject areas

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