Internal Capital Markets in Times of Crisis: The Benefit of Group Affiliation in Italy

Raffaele Santioni (), Fabio Schiantarelli and Philip E. Strahan

No 23541, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Italy’s economic and banking systems have been under stress in the wake of the Global Financial Crisis and Euro Crisis. Firms in business groups have been more likely to survive this challenging environment, compared to unaffiliated firms. Better performance stems from access to an internal capital market, and the survival value of groups increases, inter alia, with group-wide cash flow. We show that actual internal capital transfers increase during the crisis, and these transfers move funds from cash-rich to cash-poor firms and also to those with more favorable investment opportunities. The ability to borrow externally provides additional funds that are shared across group affiliated firms. Our results highlight the benefits of internal capital markets when external capital markets are tight or distressed.

JEL-codes: G01 G21 G3 (search for similar items in EconPapers)
Date: 2017-06
New Economics Papers: this item is included in nep-cfn
Note: CF
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Citations: View citations in EconPapers (10)

Published as Raffaele Santioni & Fabio Schiantarelli & Philip E Strahan, 2020. "Internal Capital Markets in Times of Crisis: The Benefit of Group Affiliation*," Review of Finance, vol 24(4), pages 773-811.

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Related works:
Working Paper: Internal Capital Markets in Times of Crisis: The Benefit of Group Affiliation in Italy (2019)
Working Paper: Internal Capital Markets in Times of Crisis: The Benefit of Group Affiliation in Italy (2017)
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