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The Deep-Pocket Effect of Internal Capital Markets

Xavier Boutin, Giacinta Cestone, Chiara Fumagalli (), Giovanni Pica and Nicolas Serrano-Velarde ()
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Giacinta Cestone: Queen Mary University of London, CSEF, and ECGI

No 2009.108, Working Papers from Fondazione Eni Enrico Mattei

Abstract: We provide evidence suggesting that incumbents' access to group deep pockets has a negative impact on entry in product markets. Relying on a unique French data set on business groups, our paper presents three major findings. First, the amount of cash holdings owned by incumbent-affiliated groups is negatively related to entry in a market. Second, the impact on entry of group deep pockets is more important in markets where access to external funding is likely to be more difficult. Third, the “entry deterring effect" of group deep pockets is more pronounced when groups have more active internal capital markets. Our findings suggest that internal capital markets operate within corporate groups and that they have a potential anti-competitive effect.

Keywords: Business Groups; Cash Holdings; Internal Capital Markets; Deep-Pockets; Market Entry (search for similar items in EconPapers)
JEL-codes: G32 G38 L41 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-bec and nep-com
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Citations: View citations in EconPapers (4) Track citations by RSS feed

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https://www.feem.it/m/publications_pages/NDL2009-108.pdf (application/pdf)

Related works:
Journal Article: The deep-pocket effect of internal capital markets (2013) Downloads
Working Paper: The Deep-Pocket Effect of Internal Capital Markets (2012) Downloads
Working Paper: The Deep-Pocket Effect of Internal Capital Markets (2012) Downloads
Working Paper: The Deep-Pocket Effect of Internal Capital Markets (2012) Downloads
Working Paper: The Deep-Pocket Effect of Internal Capital Markets (2011) Downloads
Working Paper: The Deep-Pocket Effect of Internal Capital Markets (2009) Downloads
Working Paper: The Deep Pocket Effect of Internal Capital Markets (2009) Downloads
Working Paper: The Deep-Pocket Effect of Internal Capital Markets (2009) Downloads
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