Business Groups and Non-efficient Investments
DOI:
https://doi.org/10.54097/fbem.v4i2.871Keywords:
Business groups, Nature of ownership, Non-efficient investments.Abstract
This paper takes China's A-share listed companies from 2012 to 2019 as a sample to study the impact of business groups on non-efficient investments. The study found that business groups will reduce the degree of investment deviation of enterprises, alleviate insufficient investment, and reduce excessive investment. Further considering the nature of ownership, it is found that, compared with state-owned enterprises, the impact of business groups on inefficient investment is more obvious in non-state-owned enterprises. Specifically, firstly, business group can reduce information asymmetry through its internal capital market, improve resource allocation efficiency, ease financing constraints, and reduce investment shortages; secondly, group companies can strengthen internal monitoring by assigning managers and adopt relative performance evaluation. and other measures to reduce agency problems and reduce excessive investment behavior. And put forward the following suggestions: First of all, actively promote the development of business group, rationally use the internal capital market functions of business group, improve the governance mechanism, regulate its development, and then improve the corporate financing environment, alleviate agency problems, and reduce inefficient investment. Secondly, it is necessary to improve the independence of state-owned enterprises, so that the management decisions of state-owned enterprises are carried out under market regulation.
Downloads
References
La Porta R, Lopezdesilanes F, Shleifer A, et al(1998). Law and Finance. Journal of Political Economy, vol.106, no.6, p.1113-1155. DOI: https://doi.org/10.1086/250042
Xin et al.(2007). Enterprise Group, Government Control and Investment Efficiency. Financial Research, vol.10, p.123-142.
Khatua, A(2017). Does business group affiliation matter for external debt finance? Evidence from India. Asian Bus Manage, vol.16, p.290–322. DOI: https://doi.org/10.1057/s41291-017-0021-7
Lin J J, Yeh Y(2020). Internal capital markets, ownership structure, and investment efficiency: Evidence from Taiwanese business groups. Pacific-basin Finance Journal. DOI: https://doi.org/10.1016/j.pacfin.2020.101284
Bae K, Kang J, Kim J, et al(2002). Tunneling or Value Added? Evidence from Mergers by Korean Business Groups. Journal of Finance, vol.57, no.6, p. 2695-2740. DOI: https://doi.org/10.1111/1540-6261.00510
Gopalan R, Nanda V K, Seru A, et al(2007). Affiliated firms and financial support: Evidence from Indian business groups. Journal of Financial Economics, vol.86, no.3, p.759-795. DOI: https://doi.org/10.1016/j.jfineco.2006.09.008
Li et al.(2019)."Hollowout" and Ownership Arrangement: Empirical Evidence from Capital Occupation by Major Shareholders of Listed Companies in my country. Accounting Research, vol.12, p.3-13.
Cai et al.(2019). The impact of enterprise groups on innovation output: empirical evidence from listed manufacturing companies. China Industrial Economics, vol.1, p.137-155.
Williamson, Oliver E(1975). Markets and Hierarchies: Analysis and Antitrust Implications [M]. New York: Free Press, p.11-24.
Hadlock C J, Pierce J R(2010). New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index. Review of Financial Studies, vol.23, no.5, p. 1909-1940. DOI: https://doi.org/10.1093/rfs/hhq009
Richardson S A(2006). Over-investment of free cash flow. Review of Accounting Studies, vol.11, no.2, p.159-189. DOI: https://doi.org/10.1007/s11142-006-9012-1
Downloads
Published
Issue
Section
How to Cite
