Pyramid Business Groups in East Asia: Insurance or Tunneling?
A business group with a pyramid ownership structure is a prevalent form in developing countries. I show that the propping up function of pyramid groups exists only in countries without good investor protection where minority shareholders could be expropriated with low cost. A pyramid business group is not insurance mechanism for all group firms. My predictions are supported by the data on East Asian firms in 1990s. Additionally, I find that the pyramid ownership does not affect the valuation of non-distressed firms. This might be the reason that the outsider invested in the group bottom firms before the Asian Crisis.
|Length:||50,  p.|
|Date of creation:||Mar 2003|
|Date of revision:|
|Note:||First draft: April 2001; This version: March 2003|
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- Takeo Hoshi & Anil Kashyap & David Scharfstein, 1989.
"Corporate structure, liquidity, and investment: evidence from Japanese industrial groups,"
Finance and Economics Discussion Series
82, Board of Governors of the Federal Reserve System (U.S.).
- Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 33-60, February.
- Mike Burkart & Denis Gromb & Fausto Panunzi, 1998. "Why Higher Takeover Premia Protect Minority Shareholders," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 172-204, February.
- Larry H. P. Lang & Mara Faccio & Leslie Young, 2001. "Dividends and Expropriation," American Economic Review, American Economic Association, vol. 91(1), pages 54-78, March.
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