Effect of pyramid structure and judicial efficiency on the leverage of Pakistani listed companies

What is it about?

The Separation between ownership and controlling rights at Pakistani Pyramidal firms is much more complex than at firms is significantly higher than at South Asia and western Europe Pyramidal firms,consequently the effect on leverage of separating control from ownership rights is stronger at Pakistani pyramid firms . the number of intermediate at Pakistani pyramid ownership structure in significantly higher than Chines pyramidal firms which makes it more complex and result in high leverage. In the presence of efficient courts the effect of separation between ownership and controlling rights , and number of intermediate firms on leverage is less.

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Why is it important?

we report that the average ratio of control to ownership at Pakistani pyramid firms is higher than at corporations in China, East Asian, and western Europe, consequently the effect on leverage of separating control from ownership rights is stronger at Pakistani pyramid firms. The internal structure is more complex at Pakistani firms than Chinese pyramid firms. this is the first study to examine the impact of objective measures of judicial efficiency on the relationship between separation of control from ownership rights and leverage at pyramid firms and on the relationship between a pyramid’s internal structure and leverage. Contrary to the literature we find that in presence of complex pyramid structure there is no association between the ultimate owner's political connectivity and leverage. This is the first study to analyse the impact of Pyramid structure on leverage at Pakistan firms, therefore it is of great economic importance for Pakistani Economy.

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