The Deep Pocket Effect of Internal Capital Markets

29 Pages Posted: 11 Mar 2009

See all articles by Xavier Boutin

Xavier Boutin

CREST(LEI) and European Commission (DG Competition - Chief Economist Team)

Giacinta Cestone

Cass Business School, City University London; ECGI

Chiara Fumagalli

Bocconi University - Department of Economics; Centre for Economic Policy Research (CEPR)

Giovanni Pica

Idep, facoltà di economia; University of Milan - Department of Economics, Management and Quantitative Methods (DEMM); University of Milan - Centro Studi Luca d'Agliano (LdA); University of Naples Federico II - CSEF - Center for Studies in Economics and Finance

Nicolas Andre Benigno Serrano-Velarde

Bocconi University

Multiple version iconThere are 3 versions of this paper

Date Written: February 2009

Abstract

This paper provides evidence 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, the paper presents three major findings. First, consistent with theoretical predictions, the amount of financial resources owned by incumbent-affiliated groups has a negative impact on entry in a market. This suggests that internal capital markets operate within corporate groups and that they have a potential anti-competitive effect. Second, the impact on entry of group financial strength is more important in markets where access to external funding is likely to be more difficult. Third, the more active are internal capital markets, the more pronounced the effect on entry of group deep pockets.

Keywords: Business Groups, Deep-Pockets, Internal Capital Markets, Market Entry

JEL Classification: G30, L13, L40

Suggested Citation

Boutin, Xavier and Cestone, Giacinta and Fumagalli, Chiara and Pica, Giovanni and Serrano-Velarde, Nicolas Andre Benigno, The Deep Pocket Effect of Internal Capital Markets (February 2009). CEPR Discussion Paper No. DP7184. Available at SSRN: https://ssrn.com/abstract=1356393

Xavier Boutin

CREST(LEI) and European Commission (DG Competition - Chief Economist Team) ( email )

18, Boulevard Adolphe-Pinard
92244 Malakoff Cedex
France

Giacinta Cestone (Contact Author)

Cass Business School, City University London ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

ECGI ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Chiara Fumagalli

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy
+39 02 5836 5311 (Phone)
+39 02 5836 5318 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Giovanni Pica

Idep, facoltà di economia ( email )

Via Giuseppe Buffi 13
Lugano, Ticino 6900
Switzerland
+41586664784 (Phone)

University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

Via Conservatorio, 7
Milan, 20122
Italy

University of Milan - Centro Studi Luca d'Agliano (LdA) ( email )

Via P. Amedeo 34
Milano, Mi 20122
Italy

University of Naples Federico II - CSEF - Center for Studies in Economics and Finance ( email )

Via Cintia
Complesso Monte S. Angelo
Naples, Naples 80126
Italy

Nicolas Andre Benigno Serrano-Velarde

Bocconi University ( email )

Via Sarfatti, 25
Milan, MI 20136
Italy

HOME PAGE: http://https://sites.google.com/site/nicolasserranovelarde/

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