Business Groups and the Incorporation of Firm-specific Shocks into Stock Prices

Mara Faccio (mfaccio@purdue.edu), Randall Morck and M. Deniz Yavuz

No 25908, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In lower-income economies, stocks exhibit less idiosyncratic volatility and business groups are more prevalent. This study connects these two findings by showing that business group affiliated firms’ stock returns exhibit less idiosyncratic volatility than do the returns of otherwise similar unaffiliated firms. Global commodity price shocks are common shocks that contribute to firm-level idiosyncratic risk because they affect industries heterogeneously. Idiosyncratic components of commodity shocks are incorporated less into idiosyncratic returns of group affiliates than unaffiliated firms in the same industry and economy. Identification follows from difference-in-difference tests exploiting successful and matched-exogenously-failed control block transactions.

JEL-codes: G14 G15 G32 G34 M41 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-bec
Note: CF
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Citations: View citations in EconPapers (1)

Published as Mara Faccio & Randall Morck & M. Deniz Yavuz, 2020. "Business groups and the incorporation of firm-specific shocks into stock prices," Journal of Financial Economics, .

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Journal Article: Business groups and the incorporation of firm-specific shocks into stock prices (2021)
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