The Consequences Of Business Group Affiliation
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The Consequences Of Business Group Affiliation
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Author : Rosy Locorotondo
language : en
Publisher:
Release Date : 2015
The Consequences Of Business Group Affiliation written by Rosy Locorotondo and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
In contrast to the popular assumption of independence made in the classic corporate finance literature, many companies around the world are linked through common ownership to form business groups. This paper reviews the growing literature on the consequences of business group membership. The presence of internal capital markets within the group may lead to an increased availability of financial resources and more optimal investment allocation due to reduced asymmetric information. Moreover, intragroup guarantees and a group reputation effect may also improve the access to external financing, and group members can engage in risk sharing and risk reducing activities. The existence of business groups may, however, also have negative effects, including expropriation of wealth from minority shareholders, support of inefficient affiliates, political rent-seeking and excessive use of market power. The trade-off between these costs and benefits leads to mixed empirical evidence on the impact of group affiliation on profitability and innovation.
The Effects Of Losing Business Group Affiliation
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Author : Borja Larrain
language : en
Publisher:
Release Date : 2018
The Effects Of Losing Business Group Affiliation written by Borja Larrain 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 propose a novel identification strategy for estimating the effects of business group affiliation. We study two-firm business groups, some of which split up during the sample period, leaving some firms as stand-alones. We instrument for stand-alone status using shocks to the industry of the other group firm. We find that firms that become stand-alone reduce leverage and investment. Consistent with collateral cross-pledging, the effects are more pronounced when the other firm had high tangibility. Consistent with capital misallocation in groups, the reduction in leverage is stronger in firms that had low (high) profitability (leverage) relative to industry peers.
The Effect Of Business Group Affiliation On Firm Strategy
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Author : Anna Lamin
language : en
Publisher:
Release Date : 2007
The Effect Of Business Group Affiliation On Firm Strategy written by Anna Lamin and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
The Effect Of Business Group Affiliation On Firm Strategy To 25 Pages 26 To 50 Pages 51 To 75 Pages 76 To 100 Pages 101 To 125 Pages 126 To 150 Pages 151 To 175 Pages 176 To 196
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Author : Anna Lamin
language : en
Publisher: ProQuest
Release Date : 2000
The Effect Of Business Group Affiliation On Firm Strategy To 25 Pages 26 To 50 Pages 51 To 75 Pages 76 To 100 Pages 101 To 125 Pages 126 To 150 Pages 151 To 175 Pages 176 To 196 written by Anna Lamin and has been published by ProQuest this book supported file pdf, txt, epub, kindle and other format this book has been release on 2000 with categories.
The Impact Of Business Group Affiliation On Performance
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Author : Paul M. Guest
language : en
Publisher:
Release Date : 2012
The Impact Of Business Group Affiliation On Performance written by Paul M. Guest 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.
An important aspect of China's economic reforms has been an ambitious policy to develop a 100 or so large, internationally competitive business groups. Very little is known about these national champion groups or the benefits to subsidiary firms of belonging to them. This study, building from insights and methods used in existing literature, examines the performance of subsidiaries affiliated to China's national champion groups. Our results find that they perform comparatively well. We discuss possible reasons for this finding and comment more generally on the important role that business groups now play in China's reform and development.
Performance Impact Of Business Group Affiliation
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Author : Manohar Singh
language : en
Publisher:
Release Date : 2006
Performance Impact Of Business Group Affiliation written by Manohar Singh and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.
To understand the performance implications of corporate strategies as conditioned by business group affiliations, we analyze the relationship between corporate diversification and performance for 889 Indian firms. We find that diversified firms perform significantly worse than focused firms and that there exists a significant negative relationship between the degree of diversification and firm performance. A comparative analysis of firms affiliated with Indian business groups and those affiliated with MNCs indicates that sources of negative impact of diversification on performance are conditioned by the nature of a firm's affiliation. For multinational affiliates, diversification appears to be associated with poor asset quality and asset management, which is an indicator of possible agency conflict. For domestic business group affiliates, diversification appears to generate cost inefficiencies leading to poor performance.
The Effect Of Group Affiliation On The Risk Taking Of Japanese Firms
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Author : Pascal Nguyen
language : en
Publisher:
Release Date : 2009
The Effect Of Group Affiliation On The Risk Taking Of Japanese Firms written by Pascal Nguyen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with categories.
This article examines the role of keiretsu (i.e. business group) affiliation on the risk-taking of Japanese firms. We find that total risk, measured by firm-level stock price volatility, is not significantly affected by keiretsu membership. The reason is that affiliated firms are characterized by lower idiosyncratic risk along with higher systematic risk. However, idiosyncratic risk varies across business groups and appears to depend upon the firm's inclination towards its group. In contrast, the higher systematic risk of group affiliates is significant for each keiretsu and every degree of group inclination. Moreover, this result remains after adjusting risk for firm characteristics and industry effects. Hence, the consequence of group affiliation may more accurately be described by higher systematic risk. This result could reflect the weaker competitive position of keiretsu affiliates.
Business Group Affiliation Financial Development And Market Structure
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Author : Sharon Belenzon
language : en
Publisher:
Release Date : 2008
Business Group Affiliation Financial Development And Market Structure written by Sharon Belenzon and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
This paper investigates the effect of financial development on the incentives to form business groups. We examine how this relation varies across exogenous industry conditions, legal environments, and firms' life cycle. Using a comprehensive dataset on group affiliation of European firms, we find evidence that business groups substitute imperfect financial markets via their internal capital market. Our results highlight the constructive role of business groups in economies with less developed financial markets and contribute to the debate on whether business groups should be dismantled.
Institutional Development And Business Group Affiliation Value
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Author : Narahari Hansoge
language : en
Publisher:
Release Date : 2015
Institutional Development And Business Group Affiliation Value written by Narahari Hansoge and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
In this paper, we attempt to understand whether business group affiliation continues to create value with improvements in institutional environment, especially with increased product market competition. This question comes at a time when there is growing awareness that business groups dominate product markets even in developed economies (Boutin et al., 2013) and their existence is not limited to poor institutional environments (Khanna and Palepu, 2000). Such evidence calls for revisiting the Institutional Voids theory that attributes business group dominance to lack of institutional development. Our paper aims to extend this stream of the literature by focusing on how business groups respond to institutional development. The question that is still wide open is how business groups transform their structure and continue to dominate the corporate landscape. Given that most of the emerging economies are going through significant institutional development and domestic business groups are transforming into global leaders, a deeper understanding of the business group model dominance and corresponding consumer welfare is much needed. We develop a simple theoretical model and set up a novel empirical methodology to examine this issue. Using Indian data of around 36,500 firm year observations spanning 23 years (1990-2012), we find that 1) Business group affiliation continues to create value against standalone firms even with institutional development. However, affiliation gains are relatively lower in the post-reform regime. 2) Business groups that expand through horizontal integration lose market value in the post-reform regime. This result is consistent with our theoretical model. 3) In the post-reform regime, vertical integration increases business group affiliation value only when business groups have deep pockets. This is consistent with Boutin et.al. (2013). In other words, deep pockets are required more when competition is high and not when it is low as predicted by the Institutional Voids Hypothesis. Our overall results suggests that, as markets develop, business group expansion strategy and their capacity to fund from their deep pockets become more critical for their sustainability. Our results highlight the need to look beyond Institutional Voids theory for existence of business groups.
International Diversification Business Group Affiliation And Firm Performance
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Author : Ajai Gaur
language : en
Publisher:
Release Date : 2010
International Diversification Business Group Affiliation And Firm Performance written by Ajai Gaur 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.
We investigate the impact of business group affiliation on the relationship between international diversification and firm performance for emerging economy firms. We develop the theoretical arguments based on an integration of the literature on international diversification with the institutional theory perspective. We argue for a U shaped relationship between international diversification and firm performance, and suggest that a firm's affiliation to a business group moderates the relationship between international diversification and firm performance. Based on a sample of Indian firms, we find that firm performance is positively related to the degree of internationalization, while business group affiliation reduces the positive effect of internationalization on firm performance.