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Business Groups and Risk Sharing around the World

Author

Listed:
  • Tarun Khanna

    (Harvard Business School)

  • Yishay Yafeh

    (School of Business Administration, Hebrew University of Jerusalem)

Abstract

We examine the hypothesis that business groups facilitate mutual insurance among affiliated firms and find substantial evidence of risk sharing by Japanese, Korean, and Thai groups but little evidence of it elsewhere. We also find no correlation between measures of capital market development and the nature of the legal system, on the one hand, and the extent of risk sharing provided by business groups, on the other. The popular view that risk sharing in business groups is important is not validated by our analysis; other reasons are more likely to explain the ubiquity of business groups around the world.

Suggested Citation

  • Tarun Khanna & Yishay Yafeh, 2005. "Business Groups and Risk Sharing around the World," The Journal of Business, University of Chicago Press, vol. 78(1), pages 301-340, January.
  • Handle: RePEc:ucp:jnlbus:v:78:y:2005:i:1:p:301-340
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