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Overlapping Networks of Credit and Control


  • David Buchuk
  • Borja Larrain
  • Mounu Prem
  • Francisco Urzúa I


Business groups are networks of firms connected by ownership links. We study the reaction of these networks to the 2008-9 crisis using a unique dataset of Chilean intra-group loans. Internal credit increases swiftly during the crisis. Firms that are more central in the ownership network simultaneously increase lending and borrowing. Like pure intermediaries, central firms keep net lending relatively constant. Central firms do not experience a significant fall in profitability relative to the average group firm, although receivers of intra-group loans perform significantly better. Our results show that control rights are essential for credit intermediation at times of distress.

Suggested Citation

  • David Buchuk & Borja Larrain & Mounu Prem & Francisco Urzúa I, 2017. "Overlapping Networks of Credit and Control," Documentos de Trabajo 015891, Universidad del Rosario.
  • Handle: RePEc:col:000092:015891

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    Cited by:

    1. Mauricio Jara‐Bertín & Cristian Pinto‐Gutiérrez & Carlos Pombo, 2021. "The effect of intra‐group loans on the cash flow sensitivity of cash: Evidence from Chile," International Review of Finance, International Review of Finance Ltd., vol. 21(2), pages 374-403, June.
    2. Ducret, Romain, 2021. "Investors' perception of business group membership during an economic crisis : Evidence from the COVID-19 pandemic," FSES Working Papers 524, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.

    More about this item


    Business groups; networks; centrality; internal capital markets.;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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