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Corporate group
About: Corporate group is a research topic. Over the lifetime, 1747 publications have been published within this topic receiving 46868 citations.
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TL;DR: This article found that the effect of business group affiliation on firms' superior performance persistence is stronger in a state-led system of state capitalism than in a co-governed system (e.g., China) and that this divergence of the business group effect is weakened as affiliated firms internationalize.
Abstract: Business groups emerged in developing economies through direct or indirect support from the state in order to overcome a variety of institutional voids and/or to further state objectives of economic growth. However, the efficacy of this organizational form and its associated governance structures have been debated given the dual possibility of business groups to allocate resources among its affiliates for cross-subsidization or winner-picking. We argue that elements of the institutional environment comprising of the state’s approach to organizations and the political context of these interactions vary across countries, thereby influencing business groups’ resource allocation strategies and affecting the persistence of affiliated firms’ superior performance. Contrasting the types of state capitalism in China and India, we develop and test our hypotheses. We find that the effect of business group affiliation on firms’ superior performance persistence is stronger in a state-led system of state capitalism (e.g., China) than in a co-governed system (e.g., India) and that this divergence of the business group effect is weakened as affiliated firms internationalize. Our findings have implications for understanding business groups across institutional contexts and the influence of diversity in the types of state capitalism on organizational strategies.
84 citations
TL;DR: Li et al. as discussed by the authors investigated the institutional voids hypothesis, which suggests affiliation with a business group will improve a firm's performance in circumstances of poor-quality institutions and extensive market failures.
Abstract: We address the institutional voids hypothesis, which suggests affiliation with a business group will improve a firm's performance in circumstances of poor-quality institutions and extensive market failures. We hypothesize that initial positive effects of group affiliation should decline as the quality of market institutions improves. Further, we hypothesize that differences in state and private ownership will influence the value and persistence of firm affiliation. Using data on 476 publicly listed firms in 1999 and 467 matched firms in 2004, we find support for a temporal hypothesis that affiliation with a business group improves performance, but the value of group affiliation declines over time. We also find support for a state ‘helping hand’ hypothesis that suggests firms with high levels of state ownership initially experienced an amplified value effect from their group affiliation, which disappeared by 2004. The results suggest that China's policy makers are beginning to establish an institutional and market infrastructure that is conducive to entry by unaffiliated, freestanding firms.
84 citations
TL;DR: The authors analyzes the economic fundamentals of the corporate firm with publicly held shares and the salient characteristics of varying corporate systems, focusing on international differences in ownership and control structures, including alternative disciplinary mechanisms.
Abstract: This paper analyzes the economic fundamentals of the corporate firm with publicly held shares and the salient characteristics of varying corporate systems, focusing on international differences in ownership and control structures, including alternative disciplinary mechanisms. Those international differences seem to influence economic behavior and corporate performance, including the way in which corporate restructurings take place. Market-oriented corporate systems and network-oriented corporate systems are likely to mutually converge in the future.
83 citations
TL;DR: In this article, the effect of business group affiliation on corporate investment behavior in India was examined and it was shown that business group affiliates have better access to external funds than stand-alone firms.
Abstract: We examine the effect of business group affiliation on corporate investment behaviour in India. More specifically, we test whether group affiliation reduces financing constraints for the affiliated firms. We use a data set containing 694 listed Indian companies for the 1989–97 period. We estimate a simple investment equation and find evidence that the investment-cash flow sensitivity is much lower for group affiliates. This suggests that business group affiliates have better access to external funds than stand-alone firms.
83 citations
TL;DR: The authors examined the relation between business group affiliation and the cost of debt capital and found that firms affiliated with major Korean business groups enjoy a substantially lower cost of public debt than do independent firms, consistent with the co-insurance argument.
82 citations