THE ROLE AND FUNCTIONING OF BUSINESS GROUPS IN EAST ASIA AND CHILE

Stijn Claessens (), Simeon Djankov () and Leora Klapper1
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Leora Klapper1: World Bank

Abante, 2000, vol. 3, issue 1, pages 91 -107

Abstract: We compare group affiliation in seven East Asian countries and Chile, using data for more than 1,000 publicly traded firms. We document that 75 percent of listed firms in our East Asia sample are associated with business groups, but only 40 percent in Chile. We find evidence that group structures are used to diversify risks internally as firms’ market risk is influenced not only by own characteristics-such as size, price/book ratio-but also by group characteristics, especially in Chile. There are costs to groups, however. For East Asian countries, we find that group structures are used by controlling owners to expropriate other shareholders. On balance, it appears that business groups are not beneficial to shareholders.

Keywords: Business Groups; Financial Risk; Chile; East Asia (search for similar items in EconPapers)
JEL-codes: G32 G34 G35 (search for similar items in EconPapers)
Date: 2000
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