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http://ssrn.com/abstract=246001
 
 

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Ferreting Out Tunneling: An Application to Indian Business Groups


Marianne Bertrand


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Paras Mehta


Massachusetts Institute of Technology (MIT) - Department of Economics

Sendhil Mullainathan


Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

September 2000

MIT Dept. of Economics Working Paper No. 00-28

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.

Number of Pages in PDF File: 47

JEL Classification: G3

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Date posted: October 20, 2000  

Suggested Citation

Bertrand, Marianne and Mehta, Paras and Mullainathan, Sendhil, Ferreting Out Tunneling: An Application to Indian Business Groups (September 2000). MIT Dept. of Economics Working Paper No. 00-28. Available at SSRN: http://ssrn.com/abstract=246001 or http://dx.doi.org/10.2139/ssrn.246001

Contact Information

Marianne Bertrand
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-5943 (Phone)
HOME PAGE: http://gsbwww.uchicago.edu/fac/marianne.bertrand/vita/cv_0604.pdf
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-588-0341 (Phone)
617-876-2742 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Paras P. Mehta
Massachusetts Institute of Technology (MIT) - Department of Economics ( email )
50 Memorial Drive
E52-300
Cambridge, MA 02142
United States
617-253-3592 (Phone)
617-253-1330 (Fax)
Sendhil Mullainathan (Contact Author)
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
617-496-2720 (Phone)
617-495-7730 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-588-1473 (Phone)
617-876-2742 (Fax)
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