Ferreting Out Tunneling: An Application to Indian Business Groups

Marianne Bertrand, Paras Mehta and Sendhil Mullainathan

No 7952, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In many countries, controlling shareholders are accused of tunneling, transferring resources from companies where they have few cash flow rights to ones where they have more cash flow rights. Quantifying the extent of such tunneling, however, has proven difficult because of its illicit nature. This paper develops a general empirical technique for quantifying tunneling. We use the responses of different firms to performance shocks to map out the flow of resources within a group of firms and to quantify the extent to which the marginal dollar is tunneled. We apply our technique to data on Indian business groups. The results suggest a significant amount of tunneling between firms in these groups.

JEL-codes: G3 (search for similar items in EconPapers)
Date: 2000-10
Note: CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

Published as Marianne Bertrand & Paras Mehta & Sendhil Mullainathan, 2002. "Ferreting Out Tunneling: An Application To Indian Business Groups," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 121-148, February.

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