Crises as Opportunities for Growth: The Strategic Value of Business Group Affiliation
Journal of Financial and Quantitative Analysis, forthcoming
European Corporate Governance Institute – Finance Working Paper No. 781/2021
76 Pages Posted: 2 Nov 2014 Last revised: 6 Jan 2022
Date Written: December 21, 2021
Abstract
We document a novel strategic motive for family business groups to utilize their internal capital markets (ICMs) during financial crises. We find that crisis-period group ICM activity is targeted toward exerting product market dominance over standalone rivals. Groups make significant post-crisis gains in market share that are concentrated among affiliates (and industry segments within affiliates) operating in highly competitive product markets, where capturing such gains is difficult in normal times. These patterns are observed only in emerging markets, suggesting that ICMs enable groups to exploit crises to realize long-term competitive advantages only when rivals face chronic financing frictions.
Keywords: Family business groups, Internal capital markets, Product market competition, Financial crisis
JEL Classification: G01, G31, G32
Suggested Citation: Suggested Citation