Overlapping Networks of Credit and Control

David Buchuk (), Borja Larrain (), Mounu Prem and Francisco Urzúa I.

No 15891, Documentos de Trabajo from Universidad del Rosario

Abstract: Business groups are networks of firms connected by ownership links. We study the reaction of these networks to the 2008-9 crisis using a unique dataset of Chilean intra-group loans. Internal credit increases swiftly during the crisis. Firms that are more central in the ownership network simultaneously increase lending and borrowing. Like pure intermediaries, central firms keep net lending relatively constant. Central firms do not experience a significant fall in profitability relative to the average group firm, although receivers of intra-group loans perform significantly better. Our results show that control rights are essential for credit intermediation at times of distress.

Keywords: Business groups; networks; centrality; internal capital markets. (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Pages: 58
Date: 2017-11-30
New Economics Papers: this item is included in nep-cfn and nep-net
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: How Do Internal Capital Markets Work? Evidence from the Great Recession* (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000092:015891

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