Does Business Group Affiliation Matter for Superior Performance? Evidence from Pakistan

Ishtiaq Ahmad, Judit Oláh, József Popp and Domicián Máté
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Ishtiaq Ahmad: Institute of Accounting and Finance, Faculty of Economics and Business, Ihrig Károly PhD School, University of Debrecen, 4028 Debrecen, Hungary
Judit Oláh: Institute of Applied Informatics and Logistics, Faculty of Economics and Business, University of Debrecen, 4032 Debrecen, Hungary
József Popp: Institute of Sectoral Economics and Methodology, Faculty of Economics and Business, University of Debrecen, 4032 Debrecen, Hungary

Sustainability, 2018, vol. 10, issue 9, 1-19

Abstract: Business groups have been described as improving the value of the affiliated firms they control, which is often beyond the capability of standalone firms. The purpose of the current study is to analyze the financial performance of affiliates of diversified Pakistani business groups relative to standalone firms. The current study employs data from 284 Pakistani listed non-financial firms from 2008–2015. In order to test the hypotheses, two dependent variables are used, namely, accounting (Return on Assets (ROA)) and stock market (Tobin’s Q) measures of performance. Specifically, this study probes and compares the performance measures of group member and standalone firms. The findings of the study suggest that business group memberships have statistically significant effects on accounting and stock market measures of firm performance. In addition, size and sales growth have an increasing effect on the performance of firms. We believe that business groups in Pakistan are efficient economic actors and can be considered responses to high transaction costs and market failures.

Keywords: business groups; financial performance; group-affiliated; institutional voids (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:10:y:2018:i:9:p:3060-:d:166241

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