Corporate group

About: Corporate group is a research topic. Over the lifetime, 1747 publications have been published within this topic receiving 46868 citations.

Are Related-Party Sales Value-Adding or Value-Destroying? Evidence from China

Abstract: Prior literature provides mixed and relatively little evidence on the economic consequences of related-party transactions. We examine a hitherto underexplored issue of whether transactions among firms within the same business group increase or reduce firm value. Using a large sample of Chinese listed firms, we find that related-party sales increase firm value. However, this value enhancement disappears for firms with (i) large percentage of parent directors, (ii) high government ownership, or (iii) tax avoidance incentives that often couple with management's rent extraction activities. Although we find that intragroup sales improve firm value in general, we also find that corporate insiders use intragroup sales to deprive value from minority shareholders. Overall, our findings highlight the interplay between ownership structure and tax avoidance incentives in determining the economic consequences of related-party transactions.

Transfer Pricing or Formula Apportionment? Tax-Induced Distortions of Multinationals' Investment and Production Decisions

Abstract: For mitigating the problems of transfer pricing formula apportionment (FA) is discussed intensively. However, FA could even be more harmful than transfer pricing because income shifting would require changing economic decisions instead of just taking advantage of accounting options. We analyze the impact of different international tax allocation regimes on a corporate group's investment and production decisions. We show that FA offsets the advantages of decision decentralization as it reverses the separation of responsibilities. It is not clear whether FA is desirable from a fiscal or an entrepreneurial perspective. The effects of FA compared to transfer pricing depend strongly on the parameter setting under consideration, especially the decision procedure within corporate groups.

Determinants of early movers in cross-border merger and acquisition wave in an emerging market: A study of Indian firms

Abstract: A series of changes in India’s financial institutional regime led to waves of cross-border mergers and acquisitions (M&A) deals spanning various industries In this article, we explore firm-level determinants that distinguish between early movers and followers in these waves We tested our hypotheses using data for the 2001–2011 period Analysis found support for our hypotheses that prior experience (with alliances), firm size, and international embeddedness of business group influence timing of firms’ cross-border M&A Findings support the springboarding perspective that emerging market (EM) firms engage in preemptive acquisitions to gain first-mover advantage

Pyramid Business Groups in East Asia: Insurance or Tunneling?

Abstract: A business group with a pyramid ownership structure is a prevalent form in developing countries. I show that the propping up function of pyramid groups exists only in countries without good investor protection where minority shareholders could be expropriated with low cost. A pyramid business group is not insurance mechanism for all group firms. My predictions are supported by the data on East Asian firms in 1990s. Additionally, I find that the pyramid ownership does not affect the valuation of non-distressed firms. This might be the reason that the outsider invested in the group bottom firms before the Asian Crisis.