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The Effects of Losing Business Group Affiliation

2018
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Release : 2018
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Book Synopsis The Effects of Losing Business Group Affiliation by : Borja Larrain

Download or read book The Effects of Losing Business Group Affiliation written by Borja Larrain. This book was released on 2018. Available in PDF, EPUB and Kindle. Book excerpt: 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 Consequences of Business Group Affiliation

2015
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Release : 2015
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Book Synopsis The Consequences of Business Group Affiliation by : Rosy Locorotondo

Download or read book The Consequences of Business Group Affiliation written by Rosy Locorotondo. This book was released on 2015. Available in PDF, EPUB and Kindle. Book excerpt: 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.

Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups

2009
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Release : 2009
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Book Synopsis Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups by : Tarun Khanna

Download or read book Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups written by Tarun Khanna. This book was released on 2009. Available in PDF, EPUB and Kindle. Book excerpt: Emerging markets like India have poorly functioning institutions, leading to severe agency and information problems. Business groups in these markets have the potential to offer benefits to member firms, but they also have potential to destroy value. We analyze the performance of affiliates of diversified Indian business groups relative to unaffiliated firms. We find that accounting and stock market measures of firm performance initially decline with group diversification and subsequently increase once group diversification exceeds a certain level. Stock market measures suggest that, unlike U.S. conglomerates' lines of business, and similar to the affiliates of U.S. LBO associations, affiliates of the most diversified business groups outperform unaffiliated firms.

Business Group Affiliation, Firm Governance and Firm Performance

2014
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Release : 2014
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Book Synopsis Business Group Affiliation, Firm Governance and Firm Performance by : Deeksha A. Singh

Download or read book Business Group Affiliation, Firm Governance and Firm Performance written by Deeksha A. Singh. This book was released on 2014. Available in PDF, EPUB and Kindle. Book excerpt: Using an integration of agency theory with an institutional perspective, we investigate how business group affiliation, with-in firm governance and external governance environment affect firm performance in emerging economies. Using archival data on top 500 Indian and Chinese firms from multiple data sources for 2007, we found that group affiliated firms performed worse than unaffiliated firms, and the negative relationship was stronger in the case of Indian firms than Chinese firms. We also found that ownership concentration had a positive effect on firm performance, while board independence had a negative effect on firm performance. Further, we found that group affiliation - firm performance relationship in a given country context was moderated by ownership concentration.

The Effect of Business Group Affiliation on Firm Strategy

2007
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Release : 2007
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Book Synopsis The Effect of Business Group Affiliation on Firm Strategy by : Anna Lamin

Download or read book The Effect of Business Group Affiliation on Firm Strategy written by Anna Lamin. This book was released on 2007. Available in PDF, EPUB and Kindle. Book excerpt:

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