Are business groups different from other family firms? Evidence from corporate investments during political uncertainty

Kavita Wadhwa and Sudhakara Reddy Syamala

Emerging Markets Review, 2023, vol. 54, issue C

Abstract: Using a large sample of Indian family firms, we examine the investment behaviour of group-affiliated family firms versus standalone family firms during local state elections. While state elections negatively affect corporate investments, family firms invest more than non-family firms. Therefore, using a difference-in-difference estimation, we find that group-affiliated family firms invest significantly more than standalone family firms. Additionally, we find no evidence of distortive investments by group-affiliated family firms due to political pressure; rather, it appears that the unique structure allows these firms to make value-relevant investments when other firms adopt a conservative approach. Overall, our study improves the understanding of family firm investments during periods of political uncertainty.

Keywords: Political uncertainty; Corporate investments; Family business groups; Stand-alone family firms; Emerging markets; India; Internal capital markets; Elections; Political connections (search for similar items in EconPapers)
JEL-codes: G15 G18 G32 G38 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:54:y:2023:i:c:s1566014122000644

DOI: 10.1016/j.ememar.2022.100947

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