One of the most critical decisions top management in corporate groups has to make is the allocation of resources among competing investment opportunities across the group. Information asymmetry between the parent and subsidiaries, however, creates agency conflicts that complicate such...

The subsidiary’s profit distribution results in the cash transfer from the subsidiary to the parent company. We investigate the effect of this cash transfer on the business group’s agency cost. Using the sample of A-share listed companies in China from 2006 to 2017, we find that the profits...