Pyramidal Ownership Composition and Firm’s Capital Structure Policy
Institute of Business Studies, Kohat University of Science and Technology
This research paper makes comparison between groups affiliated (pyramid) firms and non pyramid firms’ capital composition. This research paper also determines pyramidal firm’s leverage as compare to standalone firms to know whether pyramidal firms maintain considerably greater debt level than standalone firms and whether pyramidal firms maintain higher leverage for tax advantages. The empirical evidences show that group affiliated firms are highly financed externally as compare to standalone firms. Group affiliated firms obtain more debt as compare to stand alone firms. Results show that firms with higher tangibility, profitability and cash in hand, obtain less debt. Findings also suggest that pyramidal firms do not obtain high level of debt for tax advantage, while non-debt tax shield standalone firms have low leverage.
Keywords: Capital structure, Pyramid firms, Debt financing, Tax advantage.