Business Group Spillovers

S. Lakshmi Naaraayanan and Daniel Wolfenzon

No 31107, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We compare the investment of standalone firms across regions after a positive shock to the investment opportunities generated by a large-scale highway development project. We show that the standalones’ investment sensitivity is lower in regions with a higher density of business groups in the local area. We investigate mechanisms driving our results and find support for a financing mechanism whereby banks allocate capital preferentially to group-affiliated firms in responding to the increase in credit demand. Overall, our study documents that business groups have spillover effects on standalone firms.

JEL-codes: G31 G32 (search for similar items in EconPapers)
Date: 2023-04
New Economics Papers: this item is included in nep-fdg, nep-mac and nep-ure
Note: CF
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Citations: View citations in EconPapers (1)

Published as S Lakshmi Naaraayanan & Daniel Wolfenzon & Holger Mueller, 2023. "Business Group Spillovers," The Review of Financial Studies, vol 37(1), pages 231-264.

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