Abstract
This study uses a unique data set to thoroughly investigate how the financing provided by a business groups' internal capital markets and control-enhancing ownership structure relate to investment efficiency. We find that group-affiliated firms that make more intensive use of related-party transactions that facilitate an internal capital market exhibit a reduced probability of under-investment. We also find that pyramidal (cross) ownership improves (weakens) investment efficiency suggesting different types of control-enhancing structure have strongly contrasting effects on investment efficiency. These findings reveal both the financing advantages and disadvantages of business groups.
Original language | English |
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Article number | 101284 |
Journal | Pacific Basin Finance Journal |
Volume | 60 |
DOIs | |
State | Published - Apr 2020 |
Keywords
- Business groups
- Cross shareholding
- Internal capital market
- Pyramidal shareholding