Family Business Group Expansion Through IPOs: The Role of Internal Capital Markets in Financing Growth While Preserving Control
Management Science, Forthcoming
51 Pages Posted: 27 Oct 2014 Last revised: 6 Jun 2019
Date Written: June 3, 2019
Using data from 44 countries, we document a new channel through which a family business group's internal capital market supports its members. We find that groups use internal capital to incubate difficult-to-finance projects, making it feasible for them to rapidly scale up, thus facilitating their IPO market access. This IPO support role is particularly valuable when groups find capital raising through SEOs less attractive due to control-retention concerns, and in capital markets with high new-firm financing barriers. Unlike carve-outs employed as a corporate restructuring strategy, group-affiliated IPOs primarily appear to serve a group's expansion goals, rather than its liquidation needs.
Keywords: Business Groups, Internal Capital Markets, Financing Constraints, IPOs
JEL Classification: G32
Suggested Citation: Suggested Citation