Daniel Wolfenzon

A theory of pyramidal ownership and family business groups

Coauthor(s): Heitor Almeida.

We provide a new rationale for pyramidal ownership in family business groups. A pyramid allows a family to access all retained earnings of a firm it already controls to set up a new firm, and to share the new firm's nondiverted payoff with shareholders of the original firm. Our model is consistent with recent evidence of a small separation between ownership and control in some pyramids, and can differentiate between pyramids and dual-class shares, even when either method can achieve the same deviation from one share–one vote. Other predictions of the model are consistent with both systematic and anecdotal evidence.

Source: Journal of Finance
Exact Citation:
Almeida, Heitor, and Daniel Wolfenzon. "A theory of pyramidal ownership and family business groups." Journal of Finance 61 (2006): 2637-2680.
Volume: 61
Pages: 2637-2680
Date: 2006