Abstract:This article explores the capital structure composition of group-affiliated firms. We find that group member firms choose to accrue higher debt ratios compared to non-group counterparts. Further disentangling the higher debt ratios of group-affiliates, we find risk-sharing or co-insurance effect whereby business groups enable member firms to share risks through income-smoothing and intra-group reallocation of resources. Our results suggest that business groups act as internal capital markets, assist affiliated… Show more
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.