Internal Capital Markets in Times of Crisis: The Benefit of Group Affiliation*

Real effects of the sovereign debt crisis in Europe: evidence from syndicated loans

Raffaele Santioni (), Fabio Schiantarelli and Philip E Strahan

Review of Finance, 2020, vol. 24, issue 4, 773-811

Abstract: Firms affiliated with business groups survive the stress of the global financial and euro crises better than unaffiliated firms. Using granular data from Italy, we show that better performance stems partly from access to an internal capital market, as the survival value of group-affiliated firms increases with group-wide cash flow. Internal cash transfers increase when banks’ health deteriorates, with funds moving from cash-rich to cash-poor firms and, some evidence suggests, to firms with favorable investment opportunities. Internal capital markets’ role thus increases when external markets (banks) are distressed.

Keywords: Groups; Internal capital markets; Crisis (search for similar items in EconPapers)
JEL-codes: G30 G32 L20 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (20)

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