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Is Group Affiliation Profitable in Developed Countries? Not in Belgium

32 Pages Posted: 21 Feb 2005  

An Buysschaert

Vrije Universiteit Brussel (VUB) - Micro-economics for Profit and Non Profit Sector (MICE)

Marc Deloof

University of Antwerp; Antwerp Management School

Marc Jegers

Free University of Brussels (VUB) - Micro-Economics for Profit and Non Profit Sector (MICE)

Date Written: June 2005

Abstract

Business groups have the potential both to offer benefits to member companies, and to destroy value. A number of studies find that group affiliation creates value for companies in emerging markets like Chile, India, Korea and Turkey. This raises the question whether business groups can also create value for companies in developed countries with strong institutions and well-functioning capital, labor and product markets. In these countries, the potential benefits of business groups are likely to be significantly lower than in emerging markets. We investigate the performance of group-affiliated companies in Belgium, and find that these companies significantly underperform compared to independent Belgian companies. Moreover, we find a negative relationship between net intragroup financing and the performance of affiliated companies, which suggests that internal capital markets in Belgian business groups result in misallocation of capital, by transferring funds from good performers to poorly performing group companies.

Keywords: business groups, internal capital markets, company performance

JEL Classification: G3

Suggested Citation

Buysschaert, An and Deloof, Marc and Jegers, Marc, Is Group Affiliation Profitable in Developed Countries? Not in Belgium (June 2005). Available at SSRN: https://ssrn.com/abstract=670224 or http://dx.doi.org/10.2139/ssrn.670224

An Buysschaert (Contact Author)

Vrije Universiteit Brussel (VUB) - Micro-economics for Profit and Non Profit Sector (MICE) ( email )

Brussels
Belgium
+32-2-629 21 18 (Phone)
+32-2-629 20 60 (Fax)

Marc Deloof

University of Antwerp ( email )

Prinsstraat 13
Faculteit TEW
Antwerpen, 2000
Belgium
+32 3 265 41 69 (Phone)
+32 3 265 47 99 (Fax)

HOME PAGE: http://https://www.uantwerpen.be/en/staff/marc-deloof/

Antwerp Management School ( email )

Het Brantijser
Sint-Jacobsmarkt 9-13
Antwerp, 2000
Belgium

Marc Jegers

Free University of Brussels (VUB) - Micro-Economics for Profit and Non Profit Sector (MICE) ( email )

Brussels
Belgium
+32-2-629 21 13 (Phone)
+32-2-629 22 82 (Fax)

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