Business groups and the incorporation of firm-specific shocks into stock prices

Mara Faccio, Randall Morck and M. Deniz Yavuz

Journal of Financial Economics, 2021, vol. 139, issue 3, 852-871

Abstract: Firm-specific information has a damped effect on business group-affiliated firms’ stock prices. Such firms’ idiosyncratic stock returns are less responsive to idiosyncratic commodity price shocks than are the idiosyncratic returns of otherwise similar unaffiliated firms in the same country and commodity-sensitive industry. Using global commodity shocks means we assess responses to common idiosyncratic shocks of the same magnitude, frequency, and observability. Further identification follows from difference-in-difference tests exploiting successful and matched exogenously failed control block transactions. We conclude that business group firms’ stock prices provide less firm-specific information to capital providers and managers.

Keywords: Business groups; Incorporation of firm-specific information; Economic growth (search for similar items in EconPapers)
JEL-codes: G14 G15 G32 G34 M41 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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Working Paper: Business Groups and the Incorporation of Firm-specific Shocks into Stock Prices (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:139:y:2021:i:3:p:852-871

DOI: 10.1016/j.jfineco.2020.09.005

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