A theory of pyramidal ownership and family business groups

Heitor V. Almeida, Daniel Wolfenzon

Research output: Contribution to journalArticlepeer-review


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 share-holders 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.

Original languageEnglish (US)
Pages (from-to)2637-2680
Number of pages44
JournalJournal of Finance
Issue number6
StatePublished - Dec 2006
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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