IDEAS home Printed from https://ideas.repec.org/p/hit/hitcei/2007-14.html
   My bibliography  Save this paper

Allocating Risk Across Pyramidal Tiers: Evidence from Thai Business Groups

Author

Listed:
  • Bunkanwanicha, Pramuan
  • Wiwattanakantang, Yupana

Abstract

This paper shows that pyramidal ownership can be used to control downside risk. The research setting is Thailand before and after the 1997 Asian crisis. The focus is on family business groups that owned banks. The results show that the controlling family pursues different investment strategies for banks across pyramidal tiers in order to mitigate the entire group risk. Lower tier banks are used to undertake risky loans, while upper tier banks carry out more profitable investments. After the crisis hit, upper tier banks survived and almost all lower tier banks went bankrupt. By letting lower tier banks fail, the controlling family was able to save the rest of the group's firms.

Suggested Citation

  • Bunkanwanicha, Pramuan & Wiwattanakantang, Yupana, 2008. "Allocating Risk Across Pyramidal Tiers: Evidence from Thai Business Groups," CEI Working Paper Series 2007-14, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:hitcei:2007-14
    Note: April 22, 2008
    as

    Download full text from publisher

    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/15823/1/wp2007-14a.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Chutatong Charumilind & Raja Kali & Yupana Wiwattanakantang, 2006. "Connected Lending: Thailand before the Financial Crisis," The Journal of Business, University of Chicago Press, vol. 79(1), pages 181-218, January.
    2. Gopalan, Radhakrishnan & Nanda, Vikram & Seru, Amit, 2007. "Affiliated firms and financial support: Evidence from Indian business groups," Journal of Financial Economics, Elsevier, vol. 86(3), pages 759-795, December.
    3. T. S. Breusch & A. R. Pagan, 1980. "The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 239-253.
    4. Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Pyramids; Business groups; Family Firms; Banks; Corporate Governance; Emerging markets; Thailand;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hit:hitcei:2007-14. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Reiko Suzuki). General contact details of provider: http://edirc.repec.org/data/cehitjp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.