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.

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.

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 Does Business Group Affiliation Matter for Superior Performance? Evidence from Pakistan

2018 ◽  
Vol 10 (9) ◽  
pp. 3060 ◽  
Author(s):  
Ishtiaq Ahmad ◽  
Judit Oláh ◽  
József Popp ◽  
Domicián Máté
Keyword(s):  
Stock Market ◽  
Business Groups ◽  
Business Group ◽  
Superior Performance ◽  
Market Failures ◽  
Group Affiliation ◽  
Return On Assets ◽  
Financial Firms ◽  
Business Group Affiliation ◽  
Group Memberships

Business groups have been described as improving the value of the affiliated firms they control, which is often beyond the capability of standalone firms. The purpose of the current study is to analyze the financial performance of affiliates of diversified Pakistani business groups relative to standalone firms. The current study employs data from 284 Pakistani listed non-financial firms from 2008–2015. In order to test the hypotheses, two dependent variables are used, namely, accounting (Return on Assets (ROA)) and stock market (Tobin’s Q) measures of performance. Specifically, this study probes and compares the performance measures of group member and standalone firms. The findings of the study suggest that business group memberships have statistically significant effects on accounting and stock market measures of firm performance. In addition, size and sales growth have an increasing effect on the performance of firms. We believe that business groups in Pakistan are efficient economic actors and can be considered responses to high transaction costs and market failures.

scholarly journals Business Group Affiliation and Firm Performance—Evidence from Pakistani Listed Firms

2018 ◽  
Vol 57 (3) ◽  
pp. 351-371
Author(s):  
Waseemullah . ◽  
Arshad Hasan
Keyword(s):  
Agency Theory ◽  
Market Failure ◽  
Business Groups ◽  
Business Group ◽  
Performance Measure ◽  
Sample Period ◽  
Group Affiliation ◽  
Internal Markets ◽  
Excess Value ◽  
Business Group Affiliation

This study analyses the financial performance of business group affiliated firms relative to stand-alone firms in Pakistan. The investigations are done across the sample period of 1993-2012. The study employs ‘Chop shop’ methodology to construct the excess values (performance measure); in order to compare the results with earlier well documented studies of both developed and emerging countries. Both univariate and regression analyses clearly demonstrate that group affiliated firms are trading at discount (underperform relative to stand-alone firms) during the sample period. Despite the historical success in the past, the findings suggest that business groups evolve differently in the post financial reforms and privatisation programs era. The findings are consistent with the market failure argument and agency theory. However, the study finds a little evidence of efficient internal markets of Pakistani business groups. Keywords: Business Groups, Group Affiliation, Excess Value, Market Failure Theory, Agency Theory, Chop Shop Methodology

Business Group and Affiliated Firms’ Performance

2017 ◽  
Vol 1 (1) ◽  
Author(s):  
Wisnu Untoro
Keyword(s):  
Financial Performance ◽  
Empirical Model ◽  
Business Groups ◽  
Business Group ◽  
The Other ◽  
Group Affiliation ◽  
Improve Performance ◽  
Empirical Results ◽  
Group Members ◽  
The Impact

Some argue that business groups in emerging could be beneficial for affiliated firms. On the other hand, however, group affiliation could also improve performance. In this paper, we empirically examine the impact of being a member of business group on financial performance by studying Indonesian firms over the 2004-2009 period. We test the empirical model using static panel method. Overall, our empirical results do not provide evidence that affiliation with business group could improve performance. However, some business group members perform superior than others.

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