Synchronicity and firm interlocks in an emerging market

Tarun Khanna and Catherine Thomas

Journal of Financial Economics, 2009, vol. 92, issue 2, 182-204

Abstract: Stock price synchronicity has been attributed to poor corporate governance and a lack of firm-level transparency. This paper investigates the association between different kinds of firm interlocks, control groups, and synchronicity in Chile. A unique data set containing equity cross-holdings, common individual owners, and director interlocks is used to map out firm ties and control groups. While there is a correlation between synchronicity and share ownership and equity ties, synchronicity is more strongly correlated with interlocking directorates. The presence of share directors is associated with either reduced firm-level transparency or increased correlation in firm fundamentals--due, for example, to joint resource allocation across the firms.

Keywords: Information; and; market; efficiency; International; financial; markets; Latin; America (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (48)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:92:y:2009:i:2:p:182-204

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