Business Groups And Tunneling

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Ferreting Out Tunneling

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Author : Marianne Bertrand
language : en
Publisher:
Release Date : 2000

Ferreting Out Tunneling written by Marianne Bertrand and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with Conflict of interests categories.

In many countries, controlling shareholders are accused of tunneling, transferring resources from companies where they have few cash flow rights to ones where they have more cash flow rights. Quantifying the extent of such tunneling, however, has proven difficult because of its illicit nature. This paper develops a general empirical technique for quantifying tunneling. We use the responses of different firms to performance shocks to map out the flow of resources within a group of firms and to quantify the extent to which the marginal dollar is tunneled. We apply our technique to data on Indian business groups. The results suggest a significant amount of tunneling between firms in these groups

A Reexamination Of Tunneling And Business Groups

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Author : Jordan Siegel
language : en
Publisher:
Release Date : 2010

A Reexamination Of Tunneling And Business Groups written by Jordan Siegel and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.

The last decade of corporate governance research has been focused in large part on identifying what leads to superior or deficient corporate governance in emerging economies. We propose that firms' corporate governance and firms' strategic business activities within an industry are interlinked. By conducting a simultaneous economic analysis of business strategy and corporate governance, scholars can better discern the quality of a firm's governance. We look at one of the most rigorous extant methodologies for detecting "tunneling," or efforts by firms' controlling owner managers to take money for themselves at the expense of minority shareholders. We find that, in contrast to prior views, Indian business groups are not, on average, engaging in tunneling (expropriation), but are on average exhibiting good corporate governance, especially in light of the markedly different business strategies they typically undertake. Moreover, unlike many past conceptions of business groups from financial economics, sociology, and strategy, we find evidence for a knowledge-based "recombinative capabilities" view of business groups-that such groups have done the most to invest in R & D and other skills necessary to combine inputs in ways that lead to greater added value. Further, our finding that Indian business groups have grown larger and more diversified since liberalization and since broad-based corporate governance reforms were implemented, goes expressly against the prediction of prior schools of thought about business groups. We argue that the conventional wisdom about tunneling and business groups will need to be questioned and reformulated in light of the new data, methodology, and findings presented in this study.

Business Groups And Tunneling

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Author : Jae-Seung Baek
language : en
Publisher:
Release Date : 2005

Business Groups And Tunneling written by Jae-Seung Baek and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with categories.

Using a comprehensive sample of equity-linked private securities offerings by Korean firms from 1989 to 2000, we examine whether such offerings can be used as a mechanism for tunneling among firms belonging to a chaebol. We find that the chaebol-affiliated issuers sell private securities at a larger discount when the controlling shareholders are expected to receive greater wealth gains from the discount. We also find that the chaebol-affiliated issuers realize an 8.8% higher announcement return than do other types of issuers if they sell private securities at premium to other member firms in the same group, and if the controlling shareholders receive positive net gains from equity ownership in issuers and acquirers. In contrast, the member acquirers realize a 5.8% lower announcement return for such deals. Furthermore, a one standard deviation increase in the discount rate is associated with a 9.3% (11.4%) lower (higher) return for chaebol-affiliated issuers with good past performance (member acquirers) than for other types of issuers (acquirers). These results are consistent with tunneling within business groups and suggest that the tunneling effect is economically large and significant.

Business Groups And Tunneling

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Author : Byungki Kim
language : en
Publisher:
Release Date : 2017

Business Groups And Tunneling written by Byungki Kim and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.

This paper investigates whether corporate philanthropic decisions are associated with a firm's listing status and business group affiliation. Analyzing a large sample of public and private firms in Korea, we find that (1) public firms make more charitable contributions than private firms and (2) business group-affiliated firms make more charitable contributions than non-affiliated firms. The results suggest that public firms, owing to greater public scrutiny, and business groups, owing to higher political costs, are encouraged to make more corporate charitable contributions. Further, we find that (3) greater corporate giving by public firms than private firms is more pronounced for business group-affiliated firms, compared with non-affiliated firms. The result is consistent with business groups' strategic coordination of their affiliates' philanthropic decisions to tunnel business group resources out to controlling shareholders who hold a larger portion of private affiliates than public affiliates.

Tunneling Or Value Addition Evidence From Mergers By Korean Business Groups

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Author : Kee-Hong Bae
language : en
Publisher:
Release Date : 2003

Tunneling Or Value Addition Evidence From Mergers By Korean Business Groups written by Kee-Hong Bae and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.

Business groups in emerging markets have the potential to create either value or agency problems. Using Korean mergers, we investigate the nature of business groups in emerging markets and examine whether Korean business groups (chaebols) add value to their member firms or provide the controlling shareholders with an opportunity for wealth transfer (tunneling). We show that chaebol-affiliated firms that performed well prior to the merger realize significantly negative announcement returns. We also find that chaebol bidders who acquired poorly performing targets within the same group and/or had concentrated equity ownership by owner-managers experience significantly negative abnormal returns. These types of mergers, however, have a significantly positive effect on the market value of the portfolio of other firms in the group. Our results support the tunneling view that firms belonging to business groups pay less attention to the maximization of individual firm value and make takeover decisions that are beneficial to only controlling shareholders.

Tunneling Or Value Added Evidence From Mergers By Korean Business Groups

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Author : Kee-Hong Bae
language : en
Publisher:
Release Date : 2003

Tunneling Or Value Added Evidence From Mergers By Korean Business Groups written by Kee-Hong Bae and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with categories.

We examine whether firms belonging to Korean business groups (chaebols) benefit from acquisitions they make or whether such acquisitions provide a way for controlling shareholders to increase their wealth by increasing the value of other group firms (tunneling). We find that when a chaebol-affiliated firm makes an acquisition, its stock price on average falls. While minority shareholders of a chaebol-affiliated firm making an acquisition lose, the controlling shareholder of that firm on average benefits because the acquisition enhances the value of other firms in the group. This evidence is consistent with the tunneling hypothesis.

Business Groups And Tunneling In Brazil

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Author : Sabrina de Abreu
language : en
Publisher:
Release Date : 2006

Business Groups And Tunneling In Brazil written by Sabrina de Abreu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Brazil categories.

Propping Or Tunneling

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Author :
language : en
Publisher:
Release Date : 2012

Propping Or Tunneling written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.

Business Groups With Banks

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Author : Craig Brown
language : en
Publisher:
Release Date : 2018

Business Groups With Banks written by Craig Brown and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.

We examine the role of a bank within a business group consisting of favored firms with greater owner rights, and disadvantaged firms with fewer owner rights. Our results suggest that a bank allows a family owner to tunnel wealth by offering high-yield subordinated debt to favored firms, increasing favored-firm financial revenue; while granting high-interest-rate loans to disadvantaged firms, increasing disadvantaged-firm financial expenses. Correspondingly, a sales-growth shock to the most disadvantaged group firm is met with more financial revenue for favored firms. For disadvantaged firms within family groups, there is also less investment efficiency in the presence of a bank.

Family Business Groups And Tunneling Framework

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Author : Atif Ikram
language : en
Publisher:
Release Date : 2005

Family Business Groups And Tunneling Framework written by Atif Ikram and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with Family-owned business enterprises categories.