Pyramidal Ownership and Company Value: Evidence from Polish Listed Companies

This paper examines the effects of pyramidal ownership. Using the sample of 162 non-financial companies listed on the Warsaw Stock Exchange during the period 2010-2014, we verify the relation between the adoption of a pyramidal structure and company value. Specifically, we show that the link between pyramidal ownership and company value is more complex than previously thought addressing the aspect of ownership concentration and dual class shares. Our results indicate that the use of pyramids is associated with a higher value measured by Tobin’s Q, supporting the efficient monitoring hypothesis. Contrary to our expectations the combination of pyramidal ownership and dual class shares is correlated with lower Q. Finally, while the adoption of a pyramid by a majority shareholder does not impact firm value, the combination of a pyramid, ownership concentration and dual class shares is associated with higher Q. This finding suggests that the blockholder ownership outweighs the possible cost of excessive disproportionate ownership and that pyramids and dual class shares have different effects on company value.

What does the literature say about business groups and pyramidal ownership in the period of 1960-2018?

This paper aims to analyze the results of the research in pyramidal structures within the scope of the business groups, based on a systematic literature review. The research was conducted on two large-scale journals databases (Web of Science and Scopus), using VOSviewer, HistCite™, and Iramuteq software. The textual corpus is consisting of 65 articles and 137 authors and co-authors. Bae et al. (2002) and Almeida and Wolfenzon (2006) are the most influential for the research fields. We infer as a conceptual framework that searches in pyramidal structures are contained in the field of business groups since they represent a form of organization and representation of ownership and control. We identify as a theoretical gap the analysis of the political connections and the social role. Thus, the contributions are in the sense of presenting a panorama on the themes, supporting future researches.

What does the literature say about business groups and pyramidal ownership in the period of 1960-2018?

This paper aims to analyze the results of the research in pyramidal structures within the scope of the business groups, based on a systematic literature review. The research was conducted on two large-scale journals databases (Web of Science and Scopus), using VOSviewer, HistCite™, and Iramuteq software. The textual corpus is consisting of 65 articles and 137 authors and co-authors. Bae et al. (2002) and Almeida and Wolfenzon (2006) are the most influential for the research fields. We infer as a conceptual framework that searches in pyramidal structures are contained in the field of business groups since they represent a form of organization and representation of ownership and control. We identify as a theoretical gap the analysis of the political connections and the social role. Thus, the contributions are in the sense of presenting a panorama on the themes, supporting future researches.

Corporate Governance and Pyramidal Ownership: The Role of Novo Mercado

The literature has not reached a consensus on the motivation and implications of pyramidal ownership schemes. For some, such arrangements make it easier for controlling shareholders to expropriate outside investors. More recently, some studies have challenged this view and emphasized that their rationale lies in overcoming financial constraints. This paper focuses on whether firms owned through pyramidal schemes are more likely to be listed on the “Novo Mercado,” the Brazilian stock exchange’s premium listing segment created in 2000, which prohibits firms from issuing non-voting shares. We built a dataset of ownership data with annual observations for a panel of firms over the period 2003-2010 by hand-collecting data drawn from reports that firms submit periodically to the Brazilian securities regulator (CVM). Estimating fixed effects non-linear panel data models of a binary dependent variable, we find that firms listed on the Novo Mercado are less likely to be owned through a pyramid arrangement, result which appears to be consistent with the expropriation view.

The Effect of Pyramidal Ownership Structure to the Financing Policies and Firm Value in Indonesia: Cronyman as Moderating Variable

The research to examine the effects of ownership structures on financing policies and firm valuation. The populations are all listed companies in Indonesia Stock Exchange for period of 2013 and 2015. The sample selection technique used purposive sampling and resulting in a final sample of 72 listed firms. Empirical tests are conducted using multiple regressions and two stages least squares regression to test the simultaneous relationship between ownership structure, financing policies and firm value. The estimated results provide support for the hypotheses proposed that the separation of cash flow rights and control rights have led the use of excess leverage among pyramidal companies to preserve ultimate owner’s control. However, we failed to find a significant relationship between firm’s leverage and firm’s value. The conclusion is the simultaneounity relation between ownership structure, leverage and firm value appear that only the ownership structure significantly related with leverage and firm value. Also firm value and leverage ownership impact the ownership structure. Meanwhile, leverage does not appear to have a significant relation with the firm value, or the other way around.