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Is group affiliation profitable in developed countries? Not in Belgium

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  • Buysschaert A.
  • Deloof M.
  • Jegers M.
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    Abstract

    Several studies find that business groups create value for affiliated companies in developing countries, which are characterized by weak institutions and poorly functioning markets. In these countries, business groups can act as an intermediary between imperfect markets and individual entrepreneurs. This raises the question whether business groups also create value in countries with strong institutions and well-functioning markets, as there are also substantial costs associated with business groups. We investigate the performance of group-affiliated companies in Belgium, and find that these companies significantly underperform compared to stand-alone companies. Moreover, our results suggest that internal capital markets in Belgian business groups result in misallocation of capital.

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    File URL: http://www.ua.ac.be/download.aspx?c=*TEWHI&n=23608&ct=023227&e=76570
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    Bibliographic Info

    Paper provided by University of Antwerp, Faculty of Applied Economics in its series Working Papers with number 2005014.

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    Length: 32 pages
    Date of creation: Jun 2005
    Date of revision:
    Handle: RePEc:ant:wpaper:2005014

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    Postal: Prinsstraat 13, B-2000 Antwerpen
    Web page: https://www.uantwerp.be/en/faculties/applied-economic-sciences/
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    Cited by:
    1. Beuselinck, C.A.C. & Deloof, M., 2006. "Business Groups, Taxes and Accruals Management," Discussion Paper 2006-46, Tilburg University, Center for Economic Research.

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