Download or read book Internal Capital Markets in Business Groups and the Propagation of Credit Supply Shocks written by Ms.Yu Shi and published by International Monetary Fund. This book was released on 2019-05-21 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using business registry data from China, we show that internal capital markets in business groups can propagate corporate shareholders’ credit supply shocks to their subsidiaries. An average of 16.7% local bank credit growth where corporate shareholders are located would increase subsidiaries investment by 1% of their tangible fixed asset value, which accounts for 71% (7%) of the median (average) investment rate among these firms. We argue that equity exchanges is one channel through which corporate shareholders transmit bank credit supply shocks to the subsidiaries and provide empirical evidence to support the channel.
Download or read book Internal Capital Markets in Business Groups written by Krislert Samphantharak and published by . This book was released on 2003 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Do Internal Capital Markets in Business Groups Reduce Financial Constraints written by Guilherme Kirch and published by . This book was released on 2016 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a simple model of investment in business groups subject to moral hazard. Our model suggests that productivity and pledgeable income are the drivers of resources in the internal capital markets of these groups. This prediction can be use to explain on the grounds of efficiency some results that have been interpreted in the literature as evidence of "socialist" cross-subsidization in business groups. One important implication of our model is that group firms with strong financial conditions (high pledgeable income) tend to be favored by the internal capital market while group firms with weak financial conditions (low pledgeable income) tend to give support to it. This is in sharp contrast with the hypothesis that internal capital markets in business groups can overcome the failures of external finance markets. However, this doesn't mean that internal capital markets are detrimental to economy. Finally, we derive novel empirical implications from our model that can be object of future empirical works.
Download or read book Internal Capital Markets in Family Business Groups During the Global Financial Crisis written by Alvin E. S. Ang and published by . This book was released on 2018 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a carefully-constructed global dataset of family business groups, we show that group affiliation moderates corporate investment declines experienced in the 2008 Global Financial Crisis. During this period, group internal capital market activity intensifies. The investment activity of group firms with high-growth profiles become more reliant on intra-group capital transfers. Group firms do not realize more negative crisis-period stock returns than other firms, while post-crisis, they outperform standalone firms. Our study sheds new light on the heterogeneity of firm-level responses to the largest capital market disruption in recent history.
Download or read book The Internal Capital Markets of Business Groups written by David Buchuk and published by . This book was released on 2013 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study business groups' internal capital markets using a unique data set on intra-group lending in Chile (1990-2009). In line with groups' financing advantage, firms that borrow internally have higher investment, leverage, and ROE than other firms. At the margin, controlling shareholders have higher cash-flow rights in borrowing firms than in lending firms. However, there is no robust evidence of minority shareholders losing out from intra-group loans as tunneling predicts. Our evidence is consistent with the idea that strict regulation and disclosure requirements for intra-group loans, which are features of the Chilean market, reduce the risk of expropriation in pyramids.
Download or read book The Value of the Internal Capital Markets of Business Groups written by David Buchuk and published by . This book was released on 2019 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: I estimate a dynamic investment model for business groups in which the pyramidal ownership structure generates an agency problem between controlling and minority shareholders. In the model, the controlling shareholder can transfer resources across group firms using intra-group loans, allowing risk sharing and reducing the need for external financing. In a sample of Chilean business groups, I perform counterfactual experiments in which I compare group-affiliated firms with equivalent non-group firms. I find that for the average business group the incremental value of the internal capital market represents roughly 1.5-1.7% of the firm equity value. Although the controlling shareholder gets a larger portion of the value gains, minority shareholders also benefit from these internal transactions.
Download or read book Business Groups and Internal Capital Markets written by Ozgur Berk Kan and published by . This book was released on 2006 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We compare the performance of firms affiliated with diversified business groups with the performance of unaffiliated firms in an emerging market, Turkey. Our analysis addresses the question of whether group affiliated firms create internal capital markets or control large cash flows. Our findings indicate that group affiliation improves firm's accounting performance, but not stock market performance. While deviation of cash flow rights from voting rights has negative, but insignificant effect on accounting performance, it has significant effect on market performance. Furthermore, we find that firm's accounting (but not stock market) performance increases with the level of group diversification. Our results reveal the fact that internal capital markets play an important role for the existence of business groups in an emerging market context.The views expressed in these papers are those of the author(s), they do not reflect the opinions of LECG, LLC and should not be construed as representing the positions of other experts at LECG, LLC.
Download or read book Corporate Diversification and Internal Capital Markets written by Halit Gonenc and published by . This book was released on 2006 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: We compare the performance of firms affiliated with diversified business groups with the performance of unaffiliated firms in an emerging market, Turkey. Our findings indicate that group affiliation improves firm's accounting performance, but not stock market performance. Furthermore, we find that firm's accounting (but not stock market) performance increases with the level of group diversification. Our results also indicate that having a group affiliated bank affects the accounting performance measures of the group firms positively, but the market value of the group affiliated firms negatively, supporting the misallocation of capital hypothesis. In addition, having a group affiliated media institution is found to affect the performance of the group firms positively. More importantly, we examine the frequency of seasoned equity issue offerings with the forms of cash (right and restricted right) issues and bonus issues to address the question of whether group affiliated firms create an internal capital market. We show that unaffiliated firms are more bound to external markets to raise capital while the affiliated firms use internal capital markets.The views expressed in these papers are those of the author(s), they do not reflect the opinions of LECG, LLC and should not be construed as representing the positions of other experts at LECG, LLC.
Download or read book Internal Capital Markets Cross subsidization and Product Market Competition written by Giacinta Cestone and published by . This book was released on 2001 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Internal Capital Markets in Business Groups and the Propagation of Credit Supply Shocks written by Ms.Yu Shi and published by International Monetary Fund. This book was released on 2019-05-21 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using business registry data from China, we show that internal capital markets in business groups can propagate corporate shareholders’ credit supply shocks to their subsidiaries. An average of 16.7% local bank credit growth where corporate shareholders are located would increase subsidiaries investment by 1% of their tangible fixed asset value, which accounts for 71% (7%) of the median (average) investment rate among these firms. We argue that equity exchanges is one channel through which corporate shareholders transmit bank credit supply shocks to the subsidiaries and provide empirical evidence to support the channel.
Download or read book Investment Opportunities and Internal Capital Markets written by S. Lakshmi Naaraayanan and published by . This book was released on 2016 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Internal Capital Markets in Italian Business Groups written by Raffaele Santioni and published by . This book was released on 2018 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Should Business Groups Be Dismantled The Equilibrium Costs of Efficient Internal Capital Markets written by Heitor Almeida and published by . This book was released on 2011 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the relationship between conglomerates' internal capital markets and the efficiency of economy-wide capital allocation, and identify a novel cost of conglomeration that arises from an equilibrium framework. Because of financial market imperfections engendered by imperfect investor protection, conglomerates that engage in quot;winner-pickingquot; (Stein, 1997) find it optimal to allocate scarce capital internally to mediocre projects, even when other firms in the economy have higher productivity projects that are in need of additional capital. This bias for internal capital allocation can decrease allocative efficiency even when conglomerates have efficient internal capital markets, because a substantial presence of conglomerates might make it harder for other firms in the economy to raise capital. We also argue that the negative externality associated with conglomeration is particularly costly for countries that are at intermediary levels of financial development. In such countries, a high degree of conglomeration, generated for example by the control of the corporate sector by family business groups, may decrease the efficiency of the capital market. Our theory generates novel empirical predictions that cannot be derived in models that ignore the equilibrium effects of conglomerates. These predictions are consistent with anecdotal evidence that the presence of business groups in developing countries inhibits the growth of new independent firms due to lack of finance.
Download or read book Disappearing Internal Capital Markets written by Sangwoo Lee and published by . This book was released on 2008 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines how the onset of a financial crisis affects the operation of internal capital markets among firms within a diversified business group. We find that active internal capital markets within Korean business groups (chaebols) attenuated the financial constraints of the group-affiliated firms, allowing them to make efficient capital allocations during the early 1990s. However, these markets are barely functioning after the financial crisis of 1997. Instead, we observe public debt markets serving as a substitute for internal capital markets. Our results suggest that chaebol firms' coordinated attempts to achieve healthier financial structures in the wake of the crisis have taken place at the expense of investment efficiency.
Download or read book Internal Capital Markets in Business Groups written by Heitor Almeida and published by . This book was released on 2015 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines capital reallocation among firms in Korean business groups (chaebol) in the aftermath of the 1997 Asian financial crisis, and the consequences of this capital reallocation for investment and performance of chaebol firms. We show that chaebol transferred cash from low growth to high growth member firms after the crisis, using cross-firm equity investments. This capital reallocation allowed chaebol firms with greater investment opportunities to invest significantly more than control firms in the aftermath of the crisis. Chaebol firms with greater investment opportunities also showed higher profitability and lower declines in valuation than control firms following the Asian crisis. Our results suggest that Korean chaebol used their internal capital markets to mitigate the negative effects of the Asian crisis on their investment and performance.
Download or read book Internal Capital Markets in Times of Crisis written by Raffaele Santioni and published by . This book was released on 2017 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Italy's economic and banking systems have been under stress in the wake of the Global Financial Crisis and Euro Crisis. Firms in business groups have been more likely to survive this challenging environment, compared to unaffiliated firms. Better performance stems from access to an internal capital market, and the survival value of groups increases, inter alia, with group-wide cash flow. We show that actual internal capital transfers increase during the crisis, and these transfers move funds from cash-rich to cash-poor firms and also to those with more favorable investment opportunities. The ability to borrow externally provides additional funds that are shared across group affiliated firms. Our results highlight the benefits of internal capital markets when external capital markets are tight or distressed.
Download or read book Emerging Market Business Groups and Firm Risk written by Bavani Subramaniam and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
