Business Groups and the Incorporation of Firm-specific Shocks into Stock Prices

53 Pages Posted: 9 May 2018 Last revised: 18 Dec 2019

See all articles by Mara Faccio

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)

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Asian Bureau of Finance and Economic Research

M. Deniz Yavuz

Purdue University - Krannert School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: April 17, 2018

Abstract

Firm specific information has a damped effect on business group firms’ stock prices. Business group affiliated firms’ idiosyncratic stock returns are less responsive to idiosyncratic commodity price shocks than are the idiosyncratic returns of otherwise similar unaffiliated firms in the same country and commodity sensitive industry. Using global commodity shocks means we assess responses to common idiosyncratic shocks of the same magnitude, frequency, and observability. Further identification follows from difference-in-difference tests exploiting successful and matched-exogenously-failed control block transactions. We conclude that business group firms’ stock prices provide less firm-specific information to capital providers and managers.

Keywords: Business groups, incorporation of firm-specific information, economic growth

JEL Classification: G14, G15, G32, G34, M41

Suggested Citation

Faccio, Mara and Morck, Randall K. and Yavuz, M. Deniz, Business Groups and the Incorporation of Firm-specific Shocks into Stock Prices (April 17, 2018). University of Alberta School of Business Research Paper No. 2018-504-1, Available at SSRN: https://ssrn.com/abstract=3167489 or http://dx.doi.org/10.2139/ssrn.3167489

Mara Faccio

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
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National Bureau of Economic Research (NBER) ( email )

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European Corporate Governance Institute (ECGI)

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

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Randall K. Morck

University of Alberta - Department of Finance and Statistical Analysis ( email )

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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Asian Bureau of Finance and Economic Research ( email )

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

M. Deniz Yavuz (Contact Author)

Purdue University - Krannert School of Management ( email )

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

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