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

Author Info

  • 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.)

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2002/dp2002-47.pdf
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Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper DP2002/47.

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Length: 32 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:unu:wpaper:dp2002-47
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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

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