Business Groups and Risk Sharing Around the World
Researchers commonly assume that business groups, a ubiquitous organizational form in emerging markets, permit affiliated firms to share risk by smoothing income flows and by reallocating money from one affiliate to another in times of distress. This view has received support in the literature on Japanese keiretsu. To examine the generality of these findings worldwide, we amass a new data set on business groups in 15 emerging markets, and couple this with historical and modern data from Japan. Our results, using multiple estimation techniques, corroborate the existing evidence on risk sharing within the Japanese keiretsu. In addition, in some emerging markets such as Brazil, Korea, Taiwan and Thailand, we find evidence suggesting that group affiliation is associated with a 20-30 percent reduction in the standard deviation of operating returns. We also find evidence of substantial quot;liquidity smoothingquot; in India, although data constraints prevent us from knowing the extent to which this phenomenon is widespread. However, risk reduction by business groups is far from a universal phenomenon - the magnitude of the effect is small in most of the other countries in our sample, even though it is sometimes statistically significant. Tests of two-dimensional first-order-stochastic-dominance suggest that the Japan result ? that group affiliated firms have both lower levels of operating profitability and lower standard deviations of operating profitability ? does not generalize to most emerging markets. Finally, we find no correlation between the extent of income smoothing provided by groups and measures of capital market development. We conclude that the provision of risk sharing, to compensate for under-developed capital markets, is probably not the most important reason for the ubiquity of business groups around the world
Year of publication: |
[2001]
|
---|---|
Authors: | Yafeh, Yishay |
Other Persons: | Khanna, Tarun (contributor) |
Publisher: |
[2001]: [S.l.] : SSRN |
Saved in:
freely available
Extent: | 1 Online-Ressource (62 p) |
---|---|
Type of publication: | Book / Working Paper |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 2000 erstellt |
Other identifiers: | 10.2139/ssrn.255308 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012742702
Saved in favorites
Similar items by person
-
Business groups in emerging markets : paragons or parasites?
Khanna, Tarun, (2010)
-
Business groups in emerging markets : paragons or parasites?
Khanna, Tarun, (2007)
-
Business groups in emerging markets : paragons or parasites?
Khanna, Tarun, (2005)
- More ...