Tunneling and Propping: A Justification for Pyramidal Ownership

Yohanes E. Riyanto & Linda A. Toolsema
Authors registered in the RePEc Author Service: Yohanes Eko Riyanto

No 639, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: This paper presents a formal model of tunneling and propping in a pyramidal ownership structure. Tunneling refers to controlling shareholders shifting funds from one firm to another in the same pyramid. Propping is tunneling that is done to save the receiving firm from bankruptcy. We compare the pyramidal ownership structure to the horizontal ownership structure, in which shifting funds between firms is not possible. We show that tunneling may justify the pyramidal structure only with myopic investors or in combination with propping.

Keywords: Tunneling; Propping; Pyramids; Ownership Structure; Business Groups (search for similar items in EconPapers)
JEL-codes: G32 L22 (search for similar items in EconPapers)
Date: 2004-08-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Tunneling and propping: A justification for pyramidal ownership (2008)
Working Paper: Tunneling and Propping: A Justification for Pyramidal Ownership (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:feam04:639

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