Publication
Title
Is group affiliation profitable in developed countries? Belgian evidence
Author
Abstract
Manuscript Type: Empirical Research Question/Issue: It is fairly well established that business group affiliation can compensate for relatively weak institutions in emerging markets, and in Japan. However, business groups are also common in the EU, and there have not yet been any studies of business group affiliation and firm performance in the EU. Consequently, we investigate how business group affiliation affects firm performance in Belgium. Research Findings/Insights: We find that operating profitability of group companies is significantly lower than that of stand-alone companies, while group companies have more volatile profits than stand-alone companies. Operating profitability of group companies does not depend on the extent of group diversification. Internal capital markets transfer funds from good performers to poorly performing group companies. The impact of group affiliation on profitability does not depend on group age or group ownership. Theoretical Implications: Our study is, to the best of our knowledge, the first to investigate how affiliation with a business group affects company performance in a developed country other than Japan. The results raise the question why business groups endure in so many developed countries with good investor protection and well-developed capital markets. Some explanations proposed in the literature are not confirmed. Practical Implications: Our study offers insights to policy makers and practitioners on the value and the role of business groups in developed countries. The results raise doubts about the value of these groups in such countries and suggest that policy makers may want to consider dismantling business groups in EU countries.
Language
English
Source (journal)
Corporate governance : an international review. - Oxford, 1991, currens
Publication
Oxford : 2008
ISSN
0964-8410 [print]
1467-8683 [online]
Volume/pages
16:6(2008), p. 504-518
ISI
000260528100004
Full text (Publisher's DOI)
Full text (publisher's version - intranet only)
UAntwerpen
Faculty/Department
Research group
Publication type
Subject
Affiliation
Publications with a UAntwerp address
External links
Web of Science
Record
Identification
Creation 17.11.2008
Last edited 17.06.2017
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