Abstract

State ownership and its transformation has been a feature that is an inherent part of the transition experience and led to the emergence of corporate pyramid structures in various transition economies (Ma et al., 2006; Chernykh, 2008; Kočenda and Hanousek, 2009). In general, a corporate pyramid is a group of firms whose ownership structure follows a top-to-bottom direction of control, where the ultimate owner is at the top and exerts its control over firms at successive lower levels. This fractal-like pattern of ownership can proliferate to several levels. The key characteristic of a corporate pyramid is a separation between ownership and control, which lends the ultimate owner leveraged power over minority shareholders. La Porta et al., (1999) show that corporate pyramids are widespread around the world but these structures are more often present in emerging markets (Khanna and Yafeh, 2007).