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Synchronicity and firm interlocks in an emerging market

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  • Khanna, Tarun
  • Thomas, Catherine
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    Abstract

    Stock price synchronicity has been attributed to poor corporate governance and a lack of firm-level transparency. This paper investigates the association between different kinds of firm interlocks, control groups, and synchronicity in Chile. A unique data set containing equity cross-holdings, common individual owners, and director interlocks is used to map out firm ties and control groups. While there is a correlation between synchronicity and share ownership and equity ties, synchronicity is more strongly correlated with interlocking directorates. The presence of share directors is associated with either reduced firm-level transparency or increased correlation in firm fundamentals--due, for example, to joint resource allocation across the firms.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 92 (2009)
    Issue (Month): 2 (May)
    Pages: 182-204

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    Handle: RePEc:eee:jfinec:v:92:y:2009:i:2:p:182-204

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    Web page: http://www.elsevier.com/locate/inca/505576

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    Keywords: Information and market efficiency International financial markets Latin America;

    References

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    1. repec:hal:wpaper:hal-00842582 is not listed on IDEAS
    2. Boubaker, Sabri & Mansali, Hatem & Rjiba, Hatem, 2014. "Large controlling shareholders and stock price synchronicity," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 80-96.
    3. Szymon Kaczmarek & Satomi Kimino & Annie Pye, 2014. "Interlocking directorships and firm performance in highly regulated sectors: the moderating impact of board diversity," Journal of Management and Governance, Springer, vol. 18(2), pages 347-372, May.
    4. Calomiris, Charles W. & Fisman, Raymond & Wang, Yongxiang, 2010. "Profiting from government stakes in a command economy: Evidence from Chinese asset sales," Journal of Financial Economics, Elsevier, vol. 96(3), pages 399-412, June.
    5. Hasan, Iftekhar & Song, Liang & Wachtel, Paul, 2014. "Institutional development and stock price synchronicity: Evidence from China," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 92-108.
    6. Hasan, Iftekhar & Song, Liang & Wachtel , Paul, 2013. "Institutional development and stock price synchronicity: Evidence from China," BOFIT Discussion Papers 20/2013, Bank of Finland, Institute for Economies in Transition.
    7. Domenico Scalera & Alberto Zazzaro, 2009. "Do Inter-Firm Networks Make Access to Finance Easier? Issues and Empirical Evidence," Mo.Fi.R. Working Papers 25, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.

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