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Ferreting Out Tunneling: An Application to Indian Business Groups
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In this paper, the authors developed a general empirical technique for quantifying tunneling, using responses of different firms to performance shocks to map out the flow of resources within a group of firms and to quantify the extent to which the marginal dollar is tunneled.Abstract:
In many countries, controlling shareholders are accused of tunneling, transferring resources from companies where they have few cash flow rights to ones where they have more cash flow rights. Quantifying the extent of such tunneling, however, has proven difficult because of its illicit nature. This paper develops a general empirical technique for quantifying tunneling. We use the responses of different firms to performance shocks to map out the flow of resources within a group of firms and to quantify the extent to which the marginal dollar is tunneled. We apply our technique to data on Indian business groups. The results suggest a significant amount of tunneling between firms in these groups.read more
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References
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Are CEOs Rewarded for Luck? The Ones Without Principals Are
TL;DR: In this paper, the authors find that CEO pay in fact responds as much to a lucky dollar as to a general dollar, and that better governed firms pay their CEO less for luck.
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Ferreting out Tunneling: An Application to Indian Business Groups
TL;DR: In this article, the authors proposed a general methodology to measure the extent of tunneling activities in Indian business groups, based on isolating and then testing the distinctive implications of the tunneling hypothesis for the propagation of earnings shocks across e rms within a group.