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Business Groups and Employment

59 Pages Posted: 5 Jun 2015 Last revised: 9 Nov 2017

Mara Faccio

Purdue University - Krannert School of Management; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

William O'Brien

University of Illinois at Chicago

Date Written: October 29, 2017

Abstract

Using a newly assembled 50 country firm-level database spanning 19 years, we document that business group affiliated firms display substantially less pronounced fluctuations in employment than unaffiliated firms in response to economic shocks. The results are robust to a variety of tests designed to mitigate a variety of endogeneity concerns, including placebo tests of failed mergers and acquisitions that would have created new group affiliations. We find no evidence that internal capital markets, agency problems, or a different performance sensitivity to economic shocks in groups are responsible for these results. Rather, the results appear to be consistent with the presence of internal labor markets.

Keywords: Business Groups, Employment, Business Cycles

JEL Classification: G3, J6, K31, E32

Suggested Citation

Faccio, Mara and O'Brien, William, Business Groups and Employment (October 29, 2017). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 539/2017. Available at SSRN: https://ssrn.com/abstract=2614250 or http://dx.doi.org/10.2139/ssrn.2614250

Mara Faccio (Contact Author)

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

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

HOME PAGE: http://www.ecgi.org

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

William O'Brien

University of Illinois at Chicago ( email )

601 S. Morgan St.
Chicago, IL 60607
United States

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