We investigate whether excess control rights of ultimate owners in pyramids affect banks' adjustment to their target capital ratio. When ultimate control rights and cash-flow rights are identical, banks increase their capital ratio by issuing equity and by reshuffling their assets without...

We investigate whether excess control rights of ultimate owners in pyramids affect banks' capital ratio adjustments. When control and cash-flow rights are identical, to boost capital ratios banks issue equity without cutting lending. However, when control rights exceed cash-flow rights, instead...