Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
10475775 | Journal of Financial Economics | 2014 | 23 Pages |
Abstract
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.
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Accounting
Authors
David Buchuk, Borja Larrain, Francisco Muñoz, Francisco Urzúa I.,