Pyramidal structure types and capital structure: Evidence from China

This paper examines the relationship between the pyramidal structure types and capital structure by using the panel date of 303 listed family companies from 2007 to 2009 in China. We find that the family controlling shareholders using different types of pyramidal structure affect the capital structure distinctly. Relative to the nonseparated pyramidal structures, the listed family businesses using the separated pyramidal structures tend to choose higher capital structure. Relative to the single-line pyramidal structures, the listed family businesses using the multiline pyramidal structures tend to finance from the inside of the enterprise groups. The result also shows that the debt leverage effect of pyramidal structure can increase the rate of bank loan, and financing substitution effect of the internal capital market can increase the rate of non-bank loan.