TY - JOUR
T1 - The internal capital markets of business groups: Evidence from intra-group loans
AU - Buchuk, D
AU - Larrain, B
AU - Munoz, F
AU - Urzua Infante, Francisco
PY - 2014/3/4
Y1 - 2014/3/4
N2 - We study business groups? internal capital markets using a unique data set on intra-group lending in Chile (1990–2009). In line with groups? financing advantage, firms that borrow internally have higher investment, leverage, and return on equity (ROE) than other firms. At the margin, controlling shareholders have higher cash-flow rights in borrowing firms than in lending firms. However, there is no robust evidence of minority shareholders losing out from intra-group loans as tunneling predicts. Our evidence is consistent with the idea that strict regulation and disclosure requirements for intra-group loans, which are features of the Chilean market, reduce the risk of expropriation in pyramids.
AB - We study business groups? internal capital markets using a unique data set on intra-group lending in Chile (1990–2009). In line with groups? financing advantage, firms that borrow internally have higher investment, leverage, and return on equity (ROE) than other firms. At the margin, controlling shareholders have higher cash-flow rights in borrowing firms than in lending firms. However, there is no robust evidence of minority shareholders losing out from intra-group loans as tunneling predicts. Our evidence is consistent with the idea that strict regulation and disclosure requirements for intra-group loans, which are features of the Chilean market, reduce the risk of expropriation in pyramids.
U2 - 10.1016/j.jfineco.2014.01.003
DO - 10.1016/j.jfineco.2014.01.003
M3 - Article
SN - 0304-405X
VL - 112
SP - 190
EP - 212
JO - Journal of Financial Economics
JF - Journal of Financial Economics
IS - 2
ER -