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

Raffaele Santioni (), Fabio Schiantarelli () and Philip Strahan
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Philip Strahan: Boston College

No 929, Boston College Working Papers in Economics from Boston College Department of Economics

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: Business groups; internal capital markets; financial crisis (search for similar items in EconPapers)
JEL-codes: G01 G21 G31 G33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn
Date: 2017-05-31, Revised 2019-08-20
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Forthcoming, Review of Finance

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Working Paper: Internal Capital Markets in Times of Crisis: The Benefit of Group Affiliation in Italy (2017) Downloads
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