Are emerging economies less efficient? Performance persistence and the impact of business group affiliation

Purpose The purpose of this paper is to investigate whether, in emerging economies, the relationship between a firm’s corporate governance (CG) and its performance is associated with firm’s affiliation to a business group. Design/methodology/approach A total of 209 publicly listed firms in India during a 10-year period from 2007 to 2016 were studied, and the random effects model was employed for analysis. Findings Empirical evidence showed that board size and institutional shareholding positively impacted firm performance, whereas the proportion of independent directors negatively impacted performance. In group-affiliated firms in emerging economies, chief executive officer duality negatively impacted, whereas institutional shareholding positively impacted performance. These results are consistent with the principal–principal agency theory. The study found no discernible impact of proportion of independent directors on firm performance in group-affiliated firms. Originality/value In analyzing the governance–performance relationship and its association with business groups, this study extends current understanding by connecting business group research in emerging economies with CG and firm performance research. In examining firms from several industries over a long period of time after controlling for firm size, capital structure and spends on research and development and marketing, the results of this study offer rich empirical evidence that contributes to the extant literature on the nature of the governance–performance relationship.

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Group affiliation and corporate debt maturity: Co-insurance or expropriation

International Journal of Managerial Finance ◽

10.1108/ijmf-04-2020-0197 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Jagan Kumar Sur ◽

Yogesh Chauhan

Keyword(s):

Business Group ◽

Debt Maturity ◽

Least Square ◽

Corporate Debt ◽

Group Affiliation ◽

Private Debt ◽

Content Type ◽

Unrelated Diversification ◽

Business Group Affiliation ◽

The Impact

PurposeWe examine how business group affiliation affects corporate debt maturity.Design/methodology/approachThis study employs the financial data of all listed Indian companies obtained from the CMIE database for 2011–2018. The ordinary least square, firm-fixed effect and Fama–Macbeth regression methods are used for empirical analysis. We use propensity score matching and difference-in-difference method to address endogeneity issues. Further, two-stage least square (2SLS) regression is performed to mitigate the endogeneity that stems from simultaneity between debt maturity and leverage.FindingsUsing Indian firms, we report that group affiliation is positively associated with corporate debt maturity; group firms use more long-term debt compared to similar standalone firms. We also observe that the positive effect of group affiliation on debt maturity is more pronounced in business group firms associated with a group having more resources and having unrelated diversification. However, information asymmetry and moral hazard problems weaken the impact of group affiliation on debt maturity structure of a firm. Overall, our results are consistent with co-insurance benefits that are an argument for the presence of business groups in emerging markets.Originality/valueThis study contributes to the existing literature by testing the role of group affiliation on corporate debt maturity decisions in the Indian market context where market imperfections persuade firms to borrow from banks. This is also the first study on determinants of corporate debt maturity that distinguishes between public and private debt.

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Does Internationalization of Business-Group-Affiliated Firms Depend on Their Performance?

Start-Up Enterprises and Contemporary Innovation Strategies in the Global Marketplace - Advances in Business Strategy and Competitive Advantage ◽

10.4018/978-1-5225-4831-7.ch011 ◽

2018 ◽

pp. 153-165

Author(s):

Subhasree Mukherjee ◽

Kavitha Pradeep

Keyword(s):

Fixed Effects ◽

Positive Relationship ◽

Business Groups ◽

Business Group ◽

Implicit Assumption ◽

Fixed Effects Model ◽

Group Affiliation ◽

Business Group Affiliation ◽

The Impact ◽

Degree Of Internationalization

Previous research on international operations of the business groups (BG) have predominantly looked into the effects of internationalization on various frontiers of business. Pertaining to emerging economies, the implicit assumption is internationalization helps to avert the uncertainties of market imperfections. We raise doubt on the implicit assumption that just being affiliated to a parent firm will provide the resources for internationalization. Therefore, we have taken up this study, to understand the dynamics of emerging economy multinationals, which are characterized by their asset seeking nature to internationalize. We have tested our hypotheses on listed Indian firms. We have selected top 499 BSE listed companies, which had reported the highest amount of sales in 2010 as the base, and we generated a balanced panel dataset of 2994 firm years using the observations for the period 2010-2015. We used General Linear Square (GLS) fixed effects model to examine the impact of performance of BG affiliated firms on their degree of internationalization. We expected a positive relationship between firm performance and degree of internationalization, which was further anticipated to be positively moderated by business group affiliation of firms.

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