Value Constraining or Value Enabling? The Impact of Business Group Affiliation on Post-Acquisition Performance by Emerging Market Firms

2020 ◽  
Vol 16 (2) ◽  
pp. 261-291
Author(s):  
Manish Popli ◽  
Radha Mukesh Ladkani
Keyword(s):  
Emerging Market ◽  
Business Groups ◽  
Governance Structure ◽  
Group Affiliation ◽  
Acquisition Performance ◽  
Theoretical Perspectives ◽  
Organizational Inertia ◽  
Empirical Context ◽  
Business Group Affiliation ◽  
The Impact

ABSTRACTLiterature has advanced two contrasting theoretical perspectives related to the governance structure of business groups: the ‘value-constraining’ perspective, which focuses on principal–principal agency conflict and organizational inertia theory, and the ‘value-enabling’ perspective, which emphasizes the role of business groups in mitigation of institutional voids. Building on these two competing lenses, we develop hypotheses to examine post-acquisition performance of affiliate firms relative to stand-alone firms. As our empirical context, we study 440 majority-stake, domestic and cross-border merger and acquisition deals closed by Indian firms during the period 2002–2013. The results imply that in emerging markets, despite concerns of organizational inertia and principal–principal agency issues, the value-enabling impact of group affiliation persists. We also examine the contextual impact of intergroup heterogeneity owing to group diversification on post-acquisition performance and find that greater group diversification leads to better performance for affiliate acquirers.

scholarly journals Business Group-Affiliation and Corporate Social Responsibility: Evidence from Listed Companies in China

2021 ◽  
Vol 13 (4) ◽  
pp. 2110
Author(s):  
Xin Huang ◽  
Xianling Jiang ◽  
Wei Liu ◽  
Qian Chen
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Emerging Market ◽  
Business Groups ◽  
Listed Companies ◽  
Business Group ◽  
Vital Role ◽  
Group Affiliation ◽  
Business Group Affiliation ◽  
Corporate Social

Business groups have played a vital role in the development of emerging markets. However, we share very limited understanding in the role of business group that act on affiliated firms’ CSR performance. Using manually sorted data on A-share listed companies and business groups in China from 2010–2017, we examine whether a company’s business group-affiliation affects its corporate social responsibility (CSR) performance and the mediating mechanisms of this association. Our empirical models show that group companies bear a higher level of social responsibility compared to independent companies. This positive relationship between group-affiliation and social responsibility relies on resource allocation through internal capital markets, rent-seeking initiatives, and consideration of corporate reputation. Moreover, group affiliation benefits the firm’s CSR performance in employee’s responsibilities, consumers’ responsibilities and environmental responsibilities, while significantly lower the shareholders’ responsibilities. Our empirical valuation of group companies’ CSR levels can serve as a benchmark for emerging market companies implementing social responsibility policies.

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

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.

Overcoming economic liminality: internationalization of B2B SME’s from a small emerging economy

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Barney G. Pacheco ◽  
Syed Akhter
Keyword(s):  
Emerging Market ◽  
Foreign Market ◽  
Emerging Economy ◽  
Foreign Market Entry ◽  
Valuable Insight ◽  
Content Type ◽  
Qualitative Research Design ◽  
Theoretical Perspectives ◽  
Internationalization Strategies ◽  
The Impact

Purpose Current research on small to medium enterprise (SME) internationalization has generated valuable insight but continues to overlook the activities of business-to-business (B2B) SMEs located in small emerging economies. This study aims to fill this gap by testing the applicability of the ownership, location and internalization (OLI) framework to understand the internationalization strategies of small B2B firms in Trinidad and Tobago, a small emerging Caribbean economy. Design/methodology/approach The study used a qualitative research design, which involved in-depth interviews with senior executives of three firms in the B2B sector who were knowledgeable about their firm’s internationalization process. Thematic analysis was then used to understand the motivations and strategies underpinning the internationalization approach adopted by each firm. Findings Contrary to the stereotype of SMEs in emerging markets as fragile enterprises, there is evidence that firms exploited the development of innovative products and processes to facilitate foreign market entry and expansion. Additionally, firms overcame resource limitations by relying on governmental ties and leveraging networking opportunities. The findings also call attention to the impact of organizational learning and the role of knowledge as a dynamic capability. Originality/value Both the context of the study and the application of the OLI framework contributes to the extant literature by yielding substantive insights into the internationalization strategies of B2B firms in a small emerging economy. The findings further highlight how the OLI framework can be supplemented by other theoretical perspectives to better understand internationalization by emerging market SMEs.

Heterogeneity and Asymmetry in Speed of Leverage Adjustment: The Indian Experience

2016 ◽  
Vol 19 (03) ◽  
pp. 1650019 ◽  
Author(s):  
Surenderrao Komera ◽  
P. J. Jijo Lukose
Keyword(s):  
Capital Structure ◽  
Cash Flow ◽  
Emerging Market ◽  
Adjustment Costs ◽  
Group Affiliation ◽  
Cross Sectional ◽  
Speed Of Adjustment ◽  
Business Group Affiliation ◽  
Optimal Leverage ◽  
Target Leverage

In this paper, we examine firms' capital structure adjustment behavior and estimate their “speed of adjustment” toward optimal leverage ratios by employing a dynamic, partial adjustment model. We find that sample firms on an average offset half of the deviation from their target leverage ratios in less than one and half (1.41) years. Such evidence suggests optimal capital structure behavior among sample firms. Further, we report cross sectional heterogeneity and asymmetry in speed of adjustment estimates, resulting from varied leverage adjustment costs across the sample firms. We find higher speed of adjustment estimates among larger sample firms suggesting higher leverage adjustment costs for smaller firms. Business group affiliation does not seem to influence the costs of sample firms' leverage adjustment. Over-levered firms report higher speed of adjustment estimates, suggesting that sample firms do not consider debt financing as a “disciplining mechanism” for managers. Further, we find lower speed of adjustment estimates for sample firms with higher cash flow, implying that Indian markets do not actively accommodate firms' cash flow needs. Thus, our findings reveal complex asymmetric information problems and consequent varied leverage adjustment costs among emerging market firms.

Corporate social responsibility, business group affiliation and shareholder wealth: evidence from an emerging market

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Eswaran Velayutham ◽  
Vijayakumaran Ratnam
Keyword(s):  
Corporate Social Responsibility ◽  
Social Responsibility ◽  
Emerging Market ◽  
Business Group ◽  
Shareholder Wealth ◽  
Group Affiliation ◽  
Content Type ◽  
Business Group Affiliation ◽  
Corporate Social ◽  
The Relationship

Purpose This paper aims to examine the relationship between corporate social responsibility (CSR) and shareholder wealth arising from announcement returns of security issuance from a frontier market. It also explores the role of business group affiliation (BGA) on this relationship. Design/methodology/approach The study uses short-term scenarios to examine the link between CSR and shareholder wealth using the event study methodology which helps us mitigate the reverse causality problems related to studies of the relationship between CSR and firm value. Abnormal returns surrounding the security issue announcements were generated using the market model. Findings This paper finds that security issuers with high CSR scores are associated with higher shareholder value. However, this paper finds that CSR activities of security issuers with BGA are value-destroying which is consistent with the agency perspective of CSR. Research limitations/implications This study is limited to only one nascent market, namely the Colombo Stock Exchange. Originality/value This study documents that CSR and BGA are important determinants, among others, of stock price reactions to security offerings in emerging markets.

Corporate R&D Investments and Risk

2017 ◽  
pp. 211-231
Author(s):  
Mine Uğurlu
Keyword(s):  
Sustainable Development ◽  
Capital Markets ◽  
Financial Constraints ◽  
Business Groups ◽  
Business Group ◽  
Corporate Diversification ◽  
Subprime Crisis ◽  
Group Affiliation ◽  
Earnings Volatility ◽  
Business Group Affiliation

Corporate R&D Investments,that constitute basis for sustainable development, are influenced by external and firm-specific risks.Evidence shows that firms in Turkey have increased R&D spending during subprime crisis despite its procyclicality in most of the emerging countries.This chapter investigates if business group affiliation or corporate diversification that is predominant in Turkey stimulate R&D investments under risk.It focuses on internal capital markets of business groups or conglomerates that may enhance R&D spending by reducing financial constraints, and likelihood of distress of the affiliated firms.The results reveal that group affiliation and diversification positively affect corporate R&D spending when firm-specific risks rise.These results are significant during the global crisis period.Group-affiliated corporations increase their R&D investments as idiosyncratic risks rise.The diversified conglomerates increase R&D investments when earnings volatility and equity erosion rise.Results indicate that large firms are more inclined to reduce R&D investments under risk.

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