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Synchronicity and firm interlocks in an emerging market

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Listed author(s):
  • 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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    File URL: http://www.sciencedirect.com/science/article/pii/S0304-405X(08)00207-9
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    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
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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

    References listed on IDEAS
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    1. Lingfeng Li, 2003. "Macroeconomic Factors and the Correlation of Stock and Bond Returns," Yale School of Management Working Papers ysm328, Yale School of Management.
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    Cited by:

    1. 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.
    2. Zhang, Min & M, Lijun & Zhang, Bo & Yi, Zhihong, 2016. "Pyramidal structure, political intervention and firms' tax burden: Evidence from China's local SOEs," Journal of Corporate Finance, Elsevier, vol. 36(C), pages 15-25.
    3. 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.
    4. 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.
    5. Zhu, PengCheng & Jog, Vijay & Otchere, Isaac, 2014. "Idiosyncratic volatility and mergers and acquisitions in emerging markets," Emerging Markets Review, Elsevier, vol. 19(C), pages 18-48.
    6. 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.
    7. Gider, Jasmin & Westheide, Christian, 2016. "Relative idiosyncratic volatility and the timing of corporate insider trading," Journal of Corporate Finance, Elsevier, vol. 39(C), pages 312-334.
    8. Ann Ling-Ching Chan & Edward Lee & Jirada Petaibanlue & Ning Tan, 2017. "Do board interlocks motivate voluntary disclosure? Evidence from Taiwan," Review of Quantitative Finance and Accounting, Springer, vol. 48(2), pages 441-466, February.
    9. Aylin Ataay, 2016. "Roles of Interlocking Directorates in an Emerging Country: Control and Coordination in Family Business Groups," Eurasian Journal of Business and Management, Eurasian Publications, vol. 4(2), pages 106-116.
    10. Serguei Saavedra & Luis J. Gilarranz & Rudolf P. Rohr & Michael Schnabel & Brian Uzzi & Jordi Bascompte, 2014. "Stock fluctuations are correlated and amplified across networks of interlocking directorates," Papers 1410.6646, arXiv.org.
    11. Rupayan Pal, 2010. "How Much Should You Own? Cross-ownership and Privatization," Working Papers id:2810, eSocialSciences.
    12. Kandel, Eugene & Kosenko, Konstantin & Morck, Randall & Yafeh, Yishay, 2013. "Business Groups in the United States: A Revised History of Corporate Ownership, Pyramids and Regulation, 1930-1950," CEPR Discussion Papers 9759, C.E.P.R. Discussion Papers.
    13. 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 & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(2), pages 347-372, May.

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