Financial Weakness and Product Market Performance: Internal Capital Market Evidence

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Using a data set of Korean business groups in the period 1999-2006, just after the Asian Financial Crisis, this study shows how business groups' financial leverage can lead group-affiliated firms to lose market share to industry rivals. This analysis reveals that the negative effect of group leverage is greater when an affiliated firm is financially weak. Additionally, high group leverage is more detrimental to firms operating in fast-growing industries, discouraging affiliated firms from investing while encouraging their rivals. The results suggest that groups' financial positions encompass a substantial strategic dimension of group-affiliated firms.
Publisher
CAMBRIDGE UNIV PRESS
Issue Date
2016-02
Language
English
Article Type
Article
Citation

JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS, v.51, no.1, pp.307 - 332

ISSN
0022-1090
DOI
10.1017/S0022109016000077
URI
http://hdl.handle.net/10203/275919
Appears in Collection
MG-Journal Papers(저널논문)
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