Ghosh, Saibal (2010): Affiliation and Firm Performance: Evidence from Indian Business Groups. Published in: The Manchester School , Vol. 78, No. 3 (June 2010): pp. 183-200.
Download (264Kb) | Preview
Using data on a sample of Indian firms from 1996-2006, we examine the effect of group affiliation on firm performance. After controlling for the differences in firm size, growth opportunities and leverage, the findings indicate that group affiliation exerts a salutary impact on firm performance, measured in terms of adjusted Q or RoA. Moreover, the evidence indicates that tunneling is not an important factor driving the valuation and profitability effect of group affiliation.
|Item Type:||MPRA Paper|
|Original Title:||Affiliation and Firm Performance: Evidence from Indian Business Groups|
|Keywords:||Business groups; Adjusted Q; RoA; Tunneling; Promoter’s share; India|
|Subjects:||G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill|
|Depositing User:||Saibal Ghosh|
|Date Deposited:||09. Aug 2010 10:10|
|Last Modified:||16. Feb 2013 00:59|
Bertrand, M., P.Mehta and S.Mullainathan (2002). Ferreting Out Tunneling: An Application to Indian Business Groups. Quarterly Journal of Economics Vol. 117, No. 1, pp. 121-48.
Caves, R., and M.Uekusa (1976). Industrial Organization in Japan. Washington DC: Brookings Institution.
Chang, S. J. (2003). Financial Crisis and Transformation of Korean Business Groups: The Rise and Fall of Chaebols. Cambridge: Cambridge University Press.
Chang, S. J., and J. Hong (2000). Economic Performance of Group-affiliated Companies in Korea: Intra-group Resource Sharing and Internal Business Transactions. Academy of Management Journal Vol. 43, No.4, pp. 429-48.
Chang, S. J., and U. Choi (1988). Strategy, Structure and Performance of Korean Business Groups: A Transactions Cost Approach. Journal of Industrial Economics Vol. 37, No.1, pp. 141-58.
Chibber, P.K., and Majumdar, S.K., (1999). Foreign Ownership and Profitability: Property Rights, Control, and the Performance of Firms in Indian Industry. Journal of Law and Economics Vol. 42, No. 2, pp. 209-238.
Claessens, S., S.Djankov, J.P. Fan and L.H.P. Lang (2002). The Benefits and Costs of Group Affiliation: Evidence from East Asia. Discussion paper 3364, Center for Economic Policy Research.
Encarnation, D., (1989). Dislodging Multinationals: India’s Comparative Perspective. Ithaca NY: Cornell University Press.
Fombrun, C., (2005). Corporate Reputations as Economic Assets. In M. Hitt, R.E. Freeman and J.S. Harrison (Eds.) The Blackwell Handbook of Strategic Management pp. 289-312. United Kingdom: Blackwell.
Ghosh, S., (2006). Did Financial Liberalization Ease Financing Constraints? Evidence from Indian Firm-level Data. Emerging Markets Review Vol. 7, No. 2, pp. 176-90.
Ghosh, S., (2007). Bank Monitoring, Managerial Ownership and Tobin’s Q: An Empirical Analysis for India. Managerial and Decision Economics Vol. 28, No. 2, pp. 129-43.
Gopalan, R., V. Nanda and A. Seru (2007). Affiliated Firms and Financial Support: Evidence from Indian Business Groups. Journal of Financial Economics Vol. 86, No. 6, pp. 759-95.
Guillen, M. F., (2001). The limits of convergence: Globalisation and organizational change in Argentina, South Korea and Spain. Princeton, NJ: Princeton University Press.
Gupta, N., (2005). Partial Privatization and Firm Performance. Journal of Finance Vol. 60, No. 5, pp. 987-1015.
Hoshi, T., A.K.Kashyap and D.Scharfstein (1991). Corporate Structure, Liquidity and Investment. Evidence from Japanese Industrial Groups. Quarterly Journal of Economics Vol. 106, No. 1, pp.33-60.
Kaplan, S.N., and L. Zingales (1997). Do Investment Cash Flow Sensitivities Provide Useful Measures of Financing Constraints? Quarterly Journal of Economics Vol. 112, No. 1, pp. 169-215.
Khanna, T., and J. Rivkin (2001). Estimating the Performance Effects of Networks in Emerging Markets. Strategic Management Journal Vol. 22, No. 1, pp. 45-74.
Khanna, T., and K. Palepu (1997). Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups. Journal of Finance Vol. 55, No. 4, 867-91.
Kim, I. (1997). Imitation to Innovation: The Dynamics of Korean Technological Learning. Boston: Harvard Business School Press.
Lensink, R., R.Van der Molen and S.Gangopadhyay (2003). Business Groups, Financing Constraint and Investment: The Case of India. Journal of Development Studies Vol. 40, No. 1, pp. 93-119.
Laeven, L., and R. Levine (2007). Is there a Diversification Discount in Financial Conglomerates. Journal of Financial Economics Vol. 85, No. 3, pp. 331-67.
Lang, L.H.P., and R. Stulz (1994). Tobin’s Q, Corporate Diversification and Firm Performance. Journal of Political Economy Vol. 102, No. 5, pp. 1248-80.
LaPorta, R., F.Lopes de Silanes, A.Shleifer and R.Vishny (2002). Investor Protection and Corporate Valuation. Journal of Finance Vol. 57, No. 4, pp. 1147-70.
Lins, K., and H.Servaes (2002). Is Corporate Diversification Beneficial in Emerging Markets. Financial Management Vol. 31, No. 1, pp. 5-31.
Majumdar, S.K., and K.Sen (2006). The Debt Wish: Rent Seeking by Business Groups and the Structure of Corporate Borrowing in India. Public Choice Vol. 130, No. 2, pp. 209-23.
Rajan, R.G., H.Servaes and L.Zingales (2000). The Cost of Diversity: Diversification Discount and Inefficient Investment. Journal of Finance Vol. 55, No.1, pp. 35-80.
Rose, N., and A.Shepard (1997). Firm Diversification and CEO Compensation: Managerial Ability or Executive Entrenchment? RAND Journal of Economics Vol. 28, No. 2, pp. 489-514.
SEBI (1997). SEBI Regulations. Available at <http://sebi.gov.in>
Shin, H., and Y.S. Park (1999). Financing Constraints and Internal Capital Markets: Evidence from Korean Chaebols. Journal of Corporate Finance Vol. 5, No.2, pp. 169-91.
Thomsen, S., and T.Pederson (2000). Ownership Structure and Economic Performance in the Largest European Companies. Strategic Management Journal Vol. 2, No. 5, 689-705.
Williamson, O., (1985). The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting. Free Press.