Business Group Spillovers

Naaraayanan, L and Wolfenzon, D (2024) Business Group Spillovers. Review of Financial Studies, 37 (1). pp. 231-264. ISSN 0893-9454 OPEN ACCESS


We compare the investment of standalone firms across regions after a positive shock to the investment opportunities generated by a large-scale highway development project. We show that the standalones' investment sensitivity is lower in regions with a higher density of business groups in the local area. We investigate mechanisms driving our results and find support for a financing mechanism whereby banks allocate capital preferentially to group-affiliated firms in responding to the increase in credit demand. Overall, our study documents that business groups have spillover effects on standalone firms.

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Item Type: Article
Subject Areas: Finance
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© The Author(s) 2023. Published by Oxford University Press.
This is an Open Access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted reuse, distribution, and reproduction in any medium, provided the original work is properly cited.

Date Deposited: 02 Aug 2023 17:07
Date of first compliant deposit: 02 Aug 2023
Last Modified: 08 Feb 2024 16:39

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