The Costs of Group Affiliation: Evidence from East Asia
AbstractWe examine the costs of business group affiliation using data for 2,600 firms in nine East Asian economies for the 1994-1996 period. We find that group-affiliated firms are on average valued below independent firms, with the discount attributable to firms whose ultimate owners have voting rights exceeding cash-flow rights. When there is no divergence between voting and cash flow rights, group-affiliated firms actually have a slight value premium over independent firms. Our results are robust to different valuation measures, time periods and estimation techniques. The evidence is consistent with the view that the anticipation of expropriation associated with group affiliation more than offsets any possible benefits of group membership.
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Bibliographic InfoPaper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2000-5.
Length: 30 p.
Date of creation: Jul 2000
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Note: This version: July 2000
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