Pyramidal ownership structure Coursework Example | Topics and Well Written Essays - 1500 words

Pyramidal ownership structure - Coursework Example ountries, and tends to exists irrespective of whether new companies are developed by smaller organizations or even groups and is crucial to underpin the entrepreneurial activity The organizational structures which various firms are connected through equity financing are ubiquitous in upcoming markets and in majority of developed countries. They are normally arranges as pyramided, where a family or individuals controls an organization, which later controls another company, which could also control another firm, and the chain continues. Despite their control, it is yet to be clear why such firm arise (Almeida and Wolfenzon, 2005). It is normally argues that such ultimate firm owners create pyramid in separating control right from the rights of cash flow and capture private control benefits at the expense of minor shareholders. Business group describes various types of organization. It is used to describe a set of legally independent companies by single families like family groups in East Asia, Latin America, and Western Europe. The term has also been used for companies with lower stance of core control achieved via interlocking directorates and school ties. Some of the examples of these business group include the Japanese Keiretsu where individual managers have a higher degree of autonomy in their companies but coordinate their tasks through the common main bank and the president council. Another illustration for the loose association is the horizontal financial groups found in Russian which are majorly industry alliances. The paper therefore, concentrates on the family groups. There is a wide economic literature on the business groups of families. The theories have suggested various arguments about the existence of business groups and the reason they use various ownership structures. To achieve that control of the member firms, families hold shared directly in their horizontal structure or alternatively it can control some of the companies through the relations of