Is group affiliation profitable in developed countries? Not in Belgium

An Buysschaert, Marc Deloof and Marc Jegers

Working Papers from University of Antwerp, Faculty of Business and Economics

Abstract: Several studies find that business groups create value for affiliated companies in developing countries, which are characterized by weak institutions and poorly functioning markets. In these countries, business groups can act as an intermediary between imperfect markets and individual entrepreneurs. This raises the question whether business groups also create value in countries with strong institutions and well-functioning markets, as there are also substantial costs associated with business groups. We investigate the performance of group-affiliated companies in Belgium, and find that these companies significantly underperform compared to stand-alone companies. Moreover, our results suggest that internal capital markets in Belgian business groups result in misallocation of capital.

Keywords: Business groups; Company performance; Developed countries; Internal capital markets (search for similar items in EconPapers)
Pages: 32 pages
Date: 2005-06
New Economics Papers: this item is included in nep-soc
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:ant:wpaper:2005014

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