Diversification and tunneling: Evidence from Indian business groups

► The diversified structure of emerging economy business groups facilitates expropriation of minority shareholders by controlling insiders through tunneling. ► We provide evidence of this using firm level panel data from India. ► Firms with ownership-control wedge lower, ownership opacity higher, than a group's core are likelier in activities unrelated to the core. ► Our findings are strengthened by evidence of tunneling in the same direction. ► Taken together this suggests an expropriation motive for diversification.