The Deep-Pocket Effect of Internal Capital Markets

Xavier Boutin, Giacinta Cestone (gcestone@unisa.it), Chiara Fumagalli (chiara.fumagalli@unibocconi.it), Giovanni Pica and Nicolas Serrano-Velarde
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Giacinta Cestone: Queen Mary University of London, CSEF, CEPR and ECGI

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

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 effeect’ 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; 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: 2009-03-10, Revised 2012-06-30
New Economics Papers: this item is included in nep-com
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Citations: View citations in EconPapers (4)

Published with the title 'The Deep-Pocket Eff ect of Internal Capital Markets', The Journal of Financial Economics, 109(1), 122-145, 2013.

Downloads: (external link)
http://www.csef.it/WP/wp217.pdf (application/pdf)

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