The Benefits and Costs of Group Affiliation: Evidence from East Asia

49 Pages Posted: 14 Jun 2002

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

Joseph P. H. Fan

The Chinese University of Hong Kong (CUHK) - School of Accountancy

Larry H.P. Lang

The Chinese University of Hong Kong (CUHK) - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: May 2002

Abstract

This Paper investigates the benefits and associated agency costs of using internal capital markets through affiliating with groups using data of two thousand firms from nine East Asian economies between 1994-96. We find that mature and slow-growing firms with ownership structures more likely to create agency problems gain more from group affiliation, while young and high-growth firms are more likely lose. Agency problems are important explanatory factors of firm value in economies outside Japan, but less so in Japan. Consistent with the literature, financially constrained firms benefit from group affiliation. Our results are robust to different time periods and estimation techniques.

Keywords: Groups, agency costs, emerging markets

JEL Classification: G31, G32, O34, O40

Suggested Citation

Claessens, Stijn and Fan, Po Hung Joseph P. H. and Lang, Hsien Ping Larry, The Benefits and Costs of Group Affiliation: Evidence from East Asia (May 2002). CEPR Discussion Paper No. 3364. Available at SSRN: https://ssrn.com/abstract=316163

Stijn Claessens (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Po Hung Joseph P. H. Fan

The Chinese University of Hong Kong (CUHK) - School of Accountancy ( email )

Shatin, N.T.
Hong Kong
(852) 26097839 (Phone)
(852) 26035114 (Fax)

Hsien Ping Larry Lang

The Chinese University of Hong Kong (CUHK) - Department of Finance ( email )

Shatin, N.T.
Hong Kong
+85 2 2609 7761 (Phone)
+85 2 2603 6586 (Fax)

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