ساختار هرمی، شرکت بهره برداری ساختار سرمایه و سلطه صاحبان نهایی

In this paper we investigate how pyramid structure, separating cash flow rights and control rights, allows ultimate owners to control the company's resources for the creation of private benefits and to avoid punishment for such conduct. Empirical tests are conducted using three-stage least squares regression. The estimated results provide support for the hypotheses proposed that the separation of cash flow rights and control rights have led to the use of excess leverage among pyramidal companies to preserve ultimate owners' control. High levels of leverage, affect the firm's valuation negatively because of the potential for financial distress. Thus, our findings may provide one additional explanation for the severity of the decrease in corporate value among the pyramidal companies in Malaysia as pointed out in the studies of Claessens et al. (2002), Lins (2003), and Lemmon and Lins (2003). Secondly, the empirical evidence from this study provides insight into the forces that influence corporate valuation of firms in developed countries particularly those that have pyramidal structure.

By definition, a pyramid structure is a business entity, i.e., a group of companies, whose ownership structure displays a top–down chain of control. In such a structure, the ultimate owners are located at the apex of the pyramid structure with successive layers of firms below the ultimate owners. La Porta, Lopez-de-Silanes and Shleifer (1999) document that ultimate owners (UO) around the world usually use this pyramid structure to control several firms simultaneously. A direct result of the pyramid structure is a separation of actual ownership or cash flow rights (CFR) and control rights (CR) in firms located in the lower part of the pyramid structure, Claessens, Djankov and Lang (2000). Accordingly, the separation of CFR and CR occurs because the pyramid structure enables the UO to establish control disproportionately to the amount of ownership the owners have in each of the successive firms. Consequently with such a pyramid structure, the UO's actual ownership position needed for control becomes smaller at each succeeding tier of the pyramid structure. Claessens et al., 2002 and Lemmon & Lins, 2003 empirically show that the separation of CFR and CR of the UO devalued the interest of other shareholders in companies in which the divergence of CFR and CR exists. Both studies conclude that the interest of other shareholders was adversely affected whenever CFR and CR divergence exists because such divergence enables UOs to exploit their CR over the company's resources without being penalized for misconduct. This study investigates the impact of the separation of CFR and CR resulting from the pyramidal structure on a firm's capital structure policy in a sample of Malaysian firms. In particular, the objective of this research is to determine whether the separation of CFR and CR adversely affects financing decisions, i.e., capital structure, among exchange listed Malaysian firms with pyramid structure. The motivation for this study comes from the findings of Claessens et al., 2000 and Claessens et al., 2002. These two papers analyze a sample from East Asian firms and find that many of the East Asian firms, including Malaysian firms display a high degree of CFR and CR separation in the hands of the UOs as a result of the pyramid structure. Consequently, this separation of CFR and CR exerts a negative impact on Asian firms' corporate valuation. Claessens et al. (2000) on the other hand show that the level of control that the Asian pyramidal firms have over the Asian economies, in general, is significant. For instance, the East Asian pyramidal firms control 80% of the East Asian economies, as measured in terms of total corporate assets. For the Malaysian case in particular, pyramidal firms control 28% of the value of listed corporate assets. This observation suggests that a relatively small number of UOs of the pyramidal firms exert effective control in most of the East Asian economies, including the economy of Malaysia. The findings of Corsetti et al., 1998 and Driffield et al., 2001 demonstrate that Asian firms, including Malaysian firms, have some problems with capital structures. Since capital structures are highly associated with corporate assets and because pyramidal-affiliated firms in Asia, including Malaysia, have significant control over total corporate assets, Claessens et al. (2000), supports the hypothesis used in this study to investigate if such capital structure mismanagement may be related to the presence of the pyramidal structure, in the case of firms listed on the Malaysian stock market. The argument of Du and Dai (2004) provided some justification as to why a relationship could exist between the separation of CFR and CR (resulting from the pyramidal structure) and a firm's potential capital structure1 problems. Based on this argument, the UO would have a tendency to raise the firm's leverage in firms located at the lower portions of the pyramid chain, to prevent the dilution of the shareholding dominance of the UO. The specific UO's motive of protecting dominance by capitalizing on the capital structure policy may sometimes cause firm leverage to be raised excessively. Consequently, the use of excessive leverage may put the firms into financial difficulty and possibly into bankruptcy. In the event of bankruptcy, the impact of excessive leverage on other shareholders of the firm is adverse. However, because of the separation of CFR and CR that result from the pyramid structure, the impact of adverse outcomes on the UO's interests may be minimal. Du and Dai (2004) hypothesize that this asymmetrical situation of loss in bad states and gain in good states on the part of the UOs induces the UOs to engage in risk-taking behavior. As a result, the UOs are more likely to raise corporate leverage excessively to maintain the UOs dominance, without considering the financial distress that may be detrimental to other shareholders. The empirical results provide support for the hypotheses proposed. For instance, the results point out that the pyramid structure accommodates the entrenchment motive of the UO, which then leads to the leverage increasing effect. Ultimately, such excessive application of debt, because of its financial distress potential, affects a firm's valuation negatively. This study contributes to the literature of pyramidal ownership in two ways. First, this research highlights the existence of a relatively risky financing policy among Malaysian pyramidal firms. Because financing policy has a significant impact on the firm's overall financial performance and valuation, Mahrt-Smith (2005), relatively risky financing policies may have led to the fragility of corporations which then translated into poor financial valuations. Thus, our empirical findings may provide one additional explanation for the severity of the decrease in corporate value among pyramidal companies in Malaysia as pointed out in Claessens et al. (2002), Lins et al. (2003), and Lemmon and Lins (2003). Secondly, empirical evidence from this study may provide insight into the forces that influence corporate valuation of firms in western countries particularly those that have pyramidal structure. For example, King and Santor (2008) examine how family ownership affects firm valuation in Canada. The authors find that a free standing family firm has a 17% higher valuation than family owned firms that are associated with pyramid structure. Finally, by using a three stage regression, we evaluate the possible relationship among the value of the firm, financing policy and pyramidal ownership structure at the same time addressing the issue of endogeneity among the three variables. In our opinion, such analysis is scarce in the literature, at least in the study of the Malaysian market. Therefore, we believe this study is a useful contribution to the literature. The study is divided into six parts. First, the study provides the introduction and justification for the study of pyramid structure affiliated firms, research objectives, and possible contributions. The second and third parts of the study discuss the pyramid structure theory and capital structure theory, for the purpose of hypothesis generation. Specifically, part three, discusses the model development, estimation method, variable descriptions. Part four describes the data collection process. Part five discusses the empirical results from the regression estimations. Finally, part six summarizes the conclusions, implications and policy, limitations of the study, and suggestions for future research.

La Porta et al. (1999) wrote that, UO around the world are able to control many affiliated companies simultaneously through a pyramid structure. Claessens et al. (2000) pointed out that, as a direct result of the use of the pyramidal structure, there is a separation of CFR and CR in firms located at the lower part of the pyramid structure. The separation of CFR and CR occurs because the pyramid structure enables the UO to establish control disproportionately to the amount of ownership the UO has in every one of the successive firms. Consequently, the UO's ownership becomes smaller, relative to control, the farther down in the pyramid structure. Claessens et al., 2002, Lemmon & Lins, 2003 and Lins, 2003 empirically showed that, as a result of the separation of CFR and CR, the UO gives no regard to the interests of other shareholders in companies in which such divergence exists. They concluded that the interest of other shareholders may be adversely affected whenever such diverge exists because, such divergence enables the UOs to exploit their control over the company's resources and to go unpunished for such conduct. Despite the adversity that the separation may inflict on other shareholders of the firms, none of the studies above mentioned the channels through which such shareholder expropriation could occur. Hence, this study hypothesizes that the channels through which such expropriation could occur is the firm's capital structure. The theoretical work of Du and Dai (2004) provided some justification as to why a relationship could exist between the pyramidal structure and the firm's capital structure. In their argument, the ultimate controlling shareholders (UOs) would have the tendency to simply raise firm leverage in order to prevent the dilution of their shareholding dominance in firms located down in the chain of pyramidal firms that they control. This specific motive of protecting one's dominance by capitalizing on the capital structure may sometimes result in the leverage increasing effect, Du and Dai (2004). Consequently, this leverage increasing may cause the respective firms to plunge into financial difficulty and bankruptcy as a result of excessive leverage. Based on this reasoning, this study predicts that such practices by the OU may lead to market devaluation of firm value. In order to test several of the hypotheses derived from the above propositions, this study gathered data set consisting of both the financial and ownership data. Both groups of data set were gathered for a 4-year span, with year 2001 as the based year. Specifically, year 2001 was chosen as the based year because the merger and acquisition process involving most of Malaysian listed firms had ended by that time. With the merger and acquisition process ended, it was hoped that the ownership structure of the Malaysian firms had become stable. Once ownership structure stability was reached, the identification of pyramidal ownership chain could be established for Malaysian pyramidal firms. In identifying pyramidal firms as well as their UOs, this study adopted the technique introduced by La Porta et al., 1999 and Claessens et al., 2000 with some additional improvements. Overall based on this technique, this study was able to identify 78 pyramidal firms. For the purpose of comparison analysis, another 78 non-pyramidal firms were chosen. The estimated results, in general provided support for the hypotheses proposed. For instance, the results of Table 3 and Table 4 indicate that the pyramid structure accommodates the entrenchment motive of the UO, which then leads to the leverage increasing effect. Ultimately, such excessive application of debt, because of its financial distress potential, affects a firm's valuation negatively. The exacerbation of agency problems as a result of the pyramidal structure may have an implication on the economy as a whole, especially when the presence of the pyramidal-affiliated firms is somewhat significant in the economy. First, because of the pyramidal structure's detrimental influence, many firms will have a relatively risky capital structure. This risky capital structure may then lead to the fragility of the corporation. Consequently from the fragility of the corporation, ordinary investors will be deterred from entering the capital market and channeling the badly needed fresh liquidity into it. The probable influence of the pyramidal firms on the financial institutions also has some negative implications for the economy as a whole. Particularly, it may seem that the probable monopsony power of the pyramidal firms, Morck et al. (2004) in acquiring the external capital may lead to the fragility of the nation's financial institutions. This is because in desperation to acquire or maintain businesses with these pyramidal firms, the financial institutions had to relax their professionalism and reduce the scrutiny normally applied to normal independent firms. When such financial institution safeguards have been circumvented, the financial institutions may be venerable to the volatility of the economy cycle and intensity of competition as well. Nothing is perfect, so this study also has its shortcomings. First, many Malaysia pyramidal firms are affiliated with a pyramid group through unlisted immediate firms. However for the purpose of this study, these firms are excluded. This is due to unavailability of ownership data problem that these unlisted immediate firms may create. For example, as a result of this unavailability of ownership data, it prohibits the study from establishing the pyramidal ownership chain and ultimately identifying the UO. Since from such pyramidal ownership link the UO could also establishes his control on the target pyramidal firm, by eliminating firms that are connected through an unlisted firm, this study is likely also to underestimate the UO influence through the pyramidal structure in general. Consequently, there would also be an underestimation of the effect of pyramidal structures on Malaysian pyramidal firm valuation as a whole. The analysis in this study can be extended to pyramidal firms in other countries in the region in order to provide better generalization. Based on the findings of Claessens et al., 2002 and Faccio & Lang, 2002, Lins et al. (2003), Lemmon & Lins, 2003 and King & Santor, 2008 the separation of CFR and CR rights has a negative impact on the valuation of the region's pyramidal firms. Because there is a strong association between a firm's valuation and capital structure as mentioned earlier, it is interesting to see if the driving force behind the corporate value reduction, is similarly the influence of the non-dilution entrenchment motive of the UO on the firm's capital structure.