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The Role And Functioning Of Business Groups In East Asia And Chile

Author

Listed:
  • STIJN CLAESSENS

    (World Bank)

  • SIMEON DJANKOV

    (World Bank)

  • LEORA KLAPPER1

    (World Bank)

Abstract

We compare group affiliation in seven East Asian countries and Chile, using data for more than 1,000 publicly traded firms. We document that 75 percent of listed firms in our East Asia sample are associated with business groups, but only 40 percent in Chile. We find evidence that group structures are used to diversify risks internally as firms’ market risk is influenced not only by own characteristics-such as size, price/book ratio-but also by group characteristics, especially in Chile. There are costs to groups, however. For East Asian countries, we find that group structures are used by controlling owners to expropriate other shareholders. On balance, it appears that business groups are not beneficial to shareholders.

Suggested Citation

  • Stijn Claessens & Simeon Djankov & Leora Klapper1, 2000. "The Role And Functioning Of Business Groups In East Asia And Chile," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 3(1), pages 91-107.
  • Handle: RePEc:pch:abante:v:3:y:2000:i:1:p:91-107
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    References listed on IDEAS

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    Cited by:

    1. Boutin, Xavier & Cestone, Giacinta & Fumagalli, Chiara & Pica, Giovanni & Serrano-Velarde, Nicolas, 2013. "The deep-pocket effect of internal capital markets," Journal of Financial Economics, Elsevier, vol. 109(1), pages 122-145.
    2. Carlos Pombo & Luis H. Gutiérrez, 2007. "Corporate Governance and Firm Valuation in Colombia," Research Department Publications 4470, Inter-American Development Bank, Research Department.
    3. Jetley, Gaurav & Mondal, Shamim S., 2015. "Rights issues and creeping acquisitions in India," Emerging Markets Review, Elsevier, vol. 23(C), pages 68-95.
    4. Fernando Lefort & Eduardo Walker, 2000. "Ownership And Capital Structure Of Chilean Conglomerates:Facts And Hypotheses For Governance," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 3(1), pages 3-27.
    5. Silva, Francisca & Majluf, Nicolas & Paredes, Ricardo D., 2006. "Family ties, interlocking directors and performance of business groups in emerging countries: The case of Chile," Journal of Business Research, Elsevier, vol. 59(3), pages 315-321, March.
    6. Fernando Lefort & Eduardo Walker, 2000. "Corporate Governance: Challenges For Latin America," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 2(2), pages 99-111.
    7. Giacinta Cestone & Chiara Fumagalli, 2003. "Winner-Picking or Cross-Subsidization? The Strategic Impact of Resource Flexibility in Business Groups," CSEF Working Papers 93, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.

    More about this item

    Keywords

    Business Groups; Financial Risk; Chile; East Asia;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G35 - Financial Economics - - Corporate Finance and Governance - - - Payout Policy

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