IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

The Benefits and Costs of Group Affiliation: Evidence from East Asia

Author Info

Listed author(s):
  • Claessens, Stijn
  • Fan, Joseph P.H.
  • Lang, Larry H.P.

Abstract

This Paper investigates the benefits and associated agency costs of using internal capital markets through affiliating with groups using data of two thousand firms from nine East Asian economies between 1994-96. We find that mature and slow-growing firms with ownership structures more likely to create agency problems gain more from group affiliation, while young and high-growth firms are more likely lose. Agency problems are important explanatory factors of firm value in economies outside Japan, but less so in Japan. Consistent with the literature, financially constrained firms benefit from group affiliation. Our results are robust to different time periods and estimation techniques.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.wider.unu.edu/sites/default/files/dp2002-47.pdf
Download Restriction: no

Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series WIDER Working Paper Series with number 047.

as
in new window

Length: 32 pages
Date of creation: 2002
Handle: RePEc:unu:wpaper:dp2002-47
Contact details of provider: Postal:
Katajanokanlaituri 6B, 00160 Helsinki

Phone: +358-9-6159911
Fax: +358-9-61599333
Web page: http://www.wider.unu.edu/
Email:


More information through EDIRC

Keywords: business group; group affiliation; East Asian corporations;

Other versions of this item:

Find related papers by JEL classification:
  • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
  • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
  • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
  • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Rafael La Porta & Florencio Lopez-de-Silanes & Guillermo Zamarripa, 2003. "Related Lending," The Quarterly Journal of Economics, Oxford University Press, vol. 118(1), pages 231-268.
  2. Stein, Jeremy C, 1997. " Internal Capital Markets and the Competition for Corporate Resources," Journal of Finance, American Finance Association, vol. 52(1), pages 111-133, March.
  3. Marianne Bertrand & Paras Mehta & Sendhil Mullainathan, 2002. "Ferreting out Tunneling: An Application to Indian Business Groups," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 121-148.
  4. Karl V. Lins & Henri Servaes, 2002. "Is Corporate Diversification Beneficial in Emerging Market?," Financial Management, Financial Management Association, vol. 31(2), Summer.
  5. Stulz, ReneM., 1988. "Managerial control of voting rights : Financing policies and the market for corporate control," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 25-54, January.
  6. repec:hrv:faseco:30747191 is not listed on IDEAS
  7. repec:hrv:faseco:30728046 is not listed on IDEAS
  8. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 33-60.
  9. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1990. "The role of banks in reducing the costs of financial distress in Japan," Journal of Financial Economics, Elsevier, vol. 27(1), pages 67-88, September.
  10. Tarun Khanna & Krishna Palepu, 2000. "Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups," Journal of Finance, American Finance Association, vol. 55(2), pages 867-891, 04.
  11. Raghuram Rajan & Henri Servaes & Luigi Zingales, 2000. "The Cost of Diversity: The Diversification Discount and Inefficient Investment," Journal of Finance, American Finance Association, vol. 55(1), pages 35-80, 02.
  12. Harvey, Campbell R. & Lins, Karl V. & Roper, Andrew H., 2004. "The effect of capital structure when expected agency costs are extreme," Journal of Financial Economics, Elsevier, vol. 74(1), pages 3-30, October.
  13. Hyun-Han Shin & René M. Stulz, 1998. "Are Internal capital Markets Efficient?," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 531-552.
  14. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
  15. David S. Scharfstein & Jeremy C. Stein, 2000. "The Dark Side of Internal Capital Markets: Divisional Rent-Seeking and Inefficient Investment," Journal of Finance, American Finance Association, vol. 55(6), pages 2537-2564, December.
  16. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, 04.
  17. Rafael La porta & Florencio Lopez-De-Silanes & Andrei Shleifer & Robert Vishny, 2002. "Investor Protection and Corporate Valuation," Journal of Finance, American Finance Association, vol. 57(3), pages 1147-1170, 06.
  18. Stijn Claessens & Simeon Djankov & Joseph P. H. Fan & Larry H. P. Lang, 2002. "Disentangling the Incentive and Entrenchment Effects of Large Shareholdings," Journal of Finance, American Finance Association, vol. 57(6), pages 2741-2771, December.
  19. Lang, Larry H P & Stulz, Rene M, 1994. "Tobin's q, Corporate Diversification, and Firm Performance," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1248-1280, December.
  20. Gelfer, Stanislav & Perotti, Enrico C, 1999. "Red Barons or Robber Barons? Governance and Financing in Russian FIG," CEPR Discussion Papers 2204, C.E.P.R. Discussion Papers.
  21. repec:hrv:faseco:30747165 is not listed on IDEAS
  22. David S. Scharfstein, 1998. "The Dark Side of Internal Capital Markets II: Evidence from Diversified Conglomerates," NBER Working Papers 6352, National Bureau of Economic Research, Inc.
  23. Friedman, Eric & Johnson, Simon & Mitton, Todd, 2003. "Propping and tunneling," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 732-750, December.
  24. Aoki, Masahiko, 1990. "Toward an Economic Model of the Japanese Firm," Journal of Economic Literature, American Economic Association, vol. 28(1), pages 1-27, March.
  25. repec:hrv:faseco:30747162 is not listed on IDEAS
  26. Nicodano, Giovanna, 1998. "Corporate groups, dual-class shares and the value of voting rights," Journal of Banking & Finance, Elsevier, vol. 22(9), pages 1117-1137, September.
  27. Perotti, Enrico C. & Gelfer, Stanislav, 2001. "Red barons or robber barons? Governance and investment in Russian financial-industrial groups," European Economic Review, Elsevier, vol. 45(9), pages 1601-1617, October.
  28. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
  29. Tarun Khanna & Yishay Yafeh, 2001. "Business Groups and Risk Sharing around the World," OFRC Working Papers Series 2001fe02, Oxford Financial Research Centre.
  30. 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.
  31. Kee-Hong Bae & Jun-Koo Kang & Jin-Mo Kim, 2002. "Tunneling or Value Added? Evidence from Mergers by Korean Business Groups," Journal of Finance, American Finance Association, vol. 57(6), pages 2695-2740, December.
  32. Marco Becht & Fabrizio Barca, 2001. "The control of corporate Europe," ULB Institutional Repository 2013/13302, ULB -- Universite Libre de Bruxelles.
  33. Karl Lins & Henri Servaes, 1999. "International Evidence on the Value of Corporate Diversification," Journal of Finance, American Finance Association, vol. 54(6), pages 2215-2239, December.
  34. Berger, Philip G. & Ofek, Eli, 1995. "Diversification's effect on firm value," Journal of Financial Economics, Elsevier, vol. 37(1), pages 39-65, January.
Full references (including those not matched with items on IDEAS)

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

as
in new window


Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Access and download statistics

When requesting a correction, please mention this item's handle: RePEc:unu:wpaper:dp2002-47. 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: (Mauricio Roa Grisales)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.