The Influence Of Pyramid Ownership Structure On Capital Structure

As a very important part of modern enterprise management structure,pyramid structure is a common form of ownership structure.Since La Porta et al.(1999)put forward the concept of pyramid structure for the first time,a lot of researches were carried out by many domestic and foreign scholars in this field which mainly include:the causes of the widespread of pyramid ownership structure,the influence of pyramid structure on the separation of control right and cash flow right and corporate value,behavior of controlling shareholders and corporate financing choices.When it comes to the impact of pyramid structure on capital structure,existing researches mostly selected private pyramid enterprises as research objects;little attention was paid to the different effects of ultimate controllers' different nature and financing environment on this problem;mainly chose the separation degree of two rights as the parameter to describe the feature of pyramid structure,which did not dig out the essential association between internal pyramid structure and capital structure;a small part of existing researches which involved pyramid layer and controlling chain often had a problem that the sample data was relatively old.Based on the literature review and theoretical analysis,this paper sorted out four channels about the influence of pyramid structure on capital structure,namely the leverage effect,stealth effect of ultimate controller,financing substitution effect of internal capital market and non-dilution effect of debt.We also analyzed the impact of these four effects on the overall debt level and the internal financing scale.We chose the pyramid structure listed companies of China from 2010 to 2014 as our research objects,and sorted out the pyramid structure data of 4181 state-owned enterprises and 3510 private enterprises by hand.By constructing a panel data model,we selected 3 explanatory variables which were pyramid layer,pyramid complexity and the separation degree of two rights to describe the structural characteristics of pyramid structure and carried empirical analysis on these variables.We also focused on how capital structure of listed pyramid structure companies affects corporate value.The empirical results show that:(1)The more pyramid layers there are,the stronger the leverage effect and stealth effect of ultimate controller are,the higher asset liability ratio is;state-owned enterprises' motivation of increasing pyramid layers to meet the financing needs is not as strong as that of the private enterprises.(2)There is a positive relationship between pyramid complexity and non-bank debt ratio,and the internal capital market formed by pyramid structure has the effect of financing substitution.Enterprises with higher financing constraints dependent on the internal capital market evidently.(3)The degree of the separation of two rights is positively related to the asset liability ratio.The non-dilution effect of debt could improve the enterprises' motivation of debt financing.The separation of two rights has a positive influence on the asset liability ratio of the state-owned listed companies,while the separation of two rights of the private enterprises has no significant effect on the asset liability ratio because of the motivation of avoiding bankruptcy cost and corporate governance.(4)There is a negative relationship between the asset liability ratio and corporate value of both state-owned and private listed companies,which means that it is necessary for the listed companies to adjust their capital structure.Nowadays,the pyramid structure enterprise groups continue to expand and pyramid structure is becoming more and more complex.The research content of this paper complied with the strategic requirements of deepening the reform of financial system.The empirical results of this paper,on the one hand,provided a theoretical basis for the adjustment of pyramid structure and the optimization of capital structure;on the other hand,also provided intellectual support for expanding financing channels of small enterprises,strengthened the information disclosure mechanism and credit supervision,improved the institutional environment and investor protection measures.The policy suggestions put forward in this paper would have a positive role in reducing the leverage ratio,enhancing the transparency of the capital market and the degree of legal protection and deepening the reform of financial system.