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Internal Capital Markets in Times of Crisis: The Benefit of Group Affiliation
[Real effects of the sovereign debt crisis in Europe: evidence from syndicated loans]

Author

Listed:
  • Raffaele Santioni
  • Fabio Schiantarelli
  • Philip E Strahan

Abstract

Firms affiliated with business groups survive the stress of the global financial and euro crises better than unaffiliated firms. Using granular data from Italy, we show that better performance stems partly from access to an internal capital market, as the survival value of group-affiliated firms increases with group-wide cash flow. Internal cash transfers increase when banks’ health deteriorates, with funds moving from cash-rich to cash-poor firms and, some evidence suggests, to firms with favorable investment opportunities. Internal capital markets’ role thus increases when external markets (banks) are distressed.

Suggested Citation

  • Raffaele Santioni & Fabio Schiantarelli & Philip E Strahan, 2020. "Internal Capital Markets in Times of Crisis: The Benefit of Group Affiliation [Real effects of the sovereign debt crisis in Europe: evidence from syndicated loans]," Review of Finance, European Finance Association, vol. 24(4), pages 773-811.
    • Handle: RePEc:oup:revfin:v:24:y:2020:i:4:p:773-811.
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    File URL: http://hdl.handle.net/10.1093/rof/rfz020
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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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