Leverage and business groups: Evidence from Indian firms

Manos, Ronny; Murinde, Victor; Green, Christopher J.

doi:10.1016/j.jeconbus.2007.04.006

Cited by 96 publications

(93 citation statements)

References 52 publications

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“…They also report that the debt financing is determined by the standard determinants of capital structure theories, but Chaebol firms have relatively higher leverage as compared to non-Chaebol firms. Similar results are documented by the Manos et al (2007) for India. Their results favor the direct implication of pecking order theory within the business group due to its features such as lower information asymmetry in affiliated firms, increased access to external capital, and creation of internal market.…”

Section: Literature Reviewsupporting

confidence: 87%

“…Manos et al (2007) discuss the implications of three capital structure theories and their affiliation with business groups 4 . They point out that lower information asymmetries among group affiliates, better access to the external markets and policy makers (Ghemawat & Khanna, 1998), easy access to foreign capital and technology (Khanna & Palepu, 2000), reputation sharing (Chang & Hong, 2000) and the internal capital market are the key factors directly linked to the pecking order theory.…”

Section: Literature Reviewmentioning

confidence: 99%

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Capital Structure and Business Groups: Evidence from Pakistan

Bhutta¹,

Suleman²

2017

j.financ.econ.res

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Abstract:The purpose of this study is not only to test the effects of group affiliation on capital structure decisions of Pakistani firms, but also to compare the determinants of capital structure of group's affiliated firms with those of independent firms. This study also investigates the differences in financial decision of both group affiliates and independent firms during the period of energy crisis.Using the 2-step GMM method, this study finds that business group affiliated firms use relatively more debt financing as compared to independent firms in Pakistan. Overall, this study verifies the existence of standard determinants as suggested by capital structure theories. However, practical differences exist regarding the determinants (e.g., firm size, firm growth, firm profitability and firm tangibility) between both group's affiliated firms and independent firms specially. Moreover, larger and more profitable groups are using more debt financing, while the highly leveraged and diversified groups have a limited access to debt financing.The findings also suggest a high level of accessibility to the debt financing for the group affiliates as compared to independent firms without a significant shift in the firm level determinants of capital structure during the energy crisis. It is the group's overall risk that appears to be an important attribute for the external finance providers during the energy crisis.

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Section: Literature Reviewsupporting

confidence: 87%

Section: Literature Reviewmentioning

confidence: 99%

Capital Structure and Business Groups: Evidence from Pakistan

Bhutta¹,

Suleman²

2017

j.financ.econ.res

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“…Kim et al (2006), studying Korean firms' capital structure before the 1997 crisis, find that chaebol affiliates are more indebted than stand-alone firms and explain this finding with the cross-debt guarantees supplied by the other chaebol members, which allow banks to reduce loan riskiness. Manos et al (2007) present evidence on 1,652 quoted non-financial firms in India and…”

Section: B Firms' Capital Structurementioning

confidence: 89%

Do Inter-firm Networks Make Access to Finance Easier? Issues and Empirical Evidence

Scalera¹,

Zazzaro²

2011

Contractual Networks, Inter-Firm Cooperation and Economic Growth

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Does participation in inter-firm networks make access to credit easier for firms? Is finance a motivation driving the formation of inter-firm networks? During the last twenty years these two questions have been hotly debated by economists both theoretically and empirically. In this paper, we selectively review the literature on inter-firm networking, internal capital markets and access to external credit.

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“…Other firms in ownership structure appear as important players in this context signaling that such blockholders seem to be well and timely informed about firm investment opportunities and funding sources. In fact, there is evidence that the membership to corporate groups in Japan and India improves access to external credit market (Hoshi, Kashyap, & Scharfstein, 1991;Lensink & Van der Molen, 2010;Manos, Murinde, & Green, 2007). Also in the context of investment policy, the presence of a nonfinancial firm as a relevant blockholder favors investment policy and reduces the intensity of financial constraints in USA (Allen & Phillips, 2000).…”

Section: Dividend Policy and Agency Conflictsmentioning

confidence: 99%

Nonfinancial Firms as Large Shareholder Use Dividend Policy for Management Monitoring in Brazil

Crisóstomo

Brandão

2018

FSRJ

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The paper analyzes whether nonfinancial firms as large blockholders of the Brazilian firm shape dividend policy. Under the Agency Theoretical framework a set of good corporate governance practices is suggested as able to control management activity and prevent managers from incurring in moral hazard problems and the emergence of excessive management power as predicted by the Managerial Power Hypothesis. In this context, the Management Monitoring Hypothesis proposes that dividend policy may be used as a management control mechanism given that dividend distribution affects the free cash flow available for managers.

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Leverage and business groups: Evidence from Indian firms

Cited by 96 publications

References 52 publications

Capital Structure and Business Groups: Evidence from Pakistan

Capital Structure and Business Groups: Evidence from Pakistan

Do Inter-firm Networks Make Access to Finance Easier? Issues and Empirical Evidence

Nonfinancial Firms as Large Shareholder Use Dividend Policy for Management Monitoring in Brazil

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