Title: The consequences of business group affiliation: A review of the literature
Authors: Locorotondo, Rosy ×
Dewaelheyns, Nico
Van Hulle, Cynthia #
Issue Date: 2012
Publisher: Intersentia
Series Title: Review of Business and Economic Literature vol:1 pages:77-97
Abstract: In contrast to the popular assumption of independence made in the classic corporate finance literature, many companies around the world are linked through common ownership to form business groups. This paper reviews the growing literature on the consequences of business group membership. The presence of internal capital markets within the group may lead to an increased availability of financial resources and more optimal investment allocation due to reduced asymmetric information. Moreover, intragroup guarantees and a group reputation effect may also improve the access to external financing, and group members can engage in risk sharing and risk reducing activities. The existence of business groups may, however, also have negative effects, including expropriation of wealth from minority shareholders, support of inefficient affiliates, political rent-seeking and excessive use of market power. The trade-off between these costs and benefits leads to mixed empirical evidence on the impact of group affiliation on profitability and innovation.
ISSN: 2034-7677
VABB publication type: VABB-1
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Research Center Finance, Leuven
Faculty of Economics and Business (FEB) - miscellaneous
Department of Financial Management, Campus Carolus Antwerp
× corresponding author
# (joint) last author

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