We provide evidence that incumbent and entrant firms' access to business group deep pockets affects the entry patterns in product markets. Relying on a unique French data set on business groups, our paper shows that entry into manufacturing industries is negatively related to the cash hoarded by incumbent affiliated groups and positively related to entrant groups' cash. In line with theoretical predictions, we find that the impact of group cash holdingson entry is more important in environments where financial constraints are pronounced. The cash holdings of incumbent and entrant groups also affect the survival rate of entrants in the three- to five-year post-entry window. Overall, our findings suggest that internal capital markets operate within corporate groups and affect the product market behavior of affiliated firms by mitigating financial constraints.
The deep-pocket effect of internal capital markets / X. Boutin, G. Cestone, C. Fumagalli, G. Pica, N. Serrano-Velarde. - In: JOURNAL OF FINANCIAL ECONOMICS. - ISSN 0304-405X. - 109:1(2013 Jul), pp. 122-145.
|Titolo:||The deep-pocket effect of internal capital markets|
|Parole Chiave:||Business groups; Cash holdings; Entry; Internal capital markets|
|Settore Scientifico Disciplinare:||Settore SECS-P/01 - Economia Politica|
Settore SECS-P/02 - Politica Economica
|Data di pubblicazione:||lug-2013|
|Digital Object Identifier (DOI):||http://dx.doi.org/10.1016/j.jfineco.2013.02.003|
|Appare nelle tipologie:||01 - Articolo su periodico|