Complex Ownership and Capital Structure

Teodora Paligorova () and Zhaoxia Xu

Staff Working Papers from Bank of Canada

Abstract: This paper investigates the impact of pyramid ownership structure and multiple controlling shareholders on firm leverage. Pyramids, having at least one controlling shareholder and a subsidiary, rely significantly more on debt financing than non-pyramid firms. Moreover, higher leverage is observed in pyramids where the second controlling shareholders have more voting rights. We also find that the disparity between the voting rights of the first two controlling shareholders is negatively related to firm leverage. Interestingly, the influence of the second controlling shareholder is only present in non-family controlled pyramids. Overall, the results are consistent with the view that controlling shareholders in pyramids use debt to secure their private benefits.

Keywords: Financial markets; International topics (search for similar items in EconPapers)
JEL-codes: G31 G32 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2009
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (4)

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Journal Article: Complex ownership and capital structure (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:09-12

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