Journal Article The Euclidean Distance Approach to Continuous Utility Functions Get access Ghanshyam Mehta Ghanshyam Mehta University of Queensland, Australia Search for other works by this author on: Oxford Academic Google Scholar The Quarterly Journal of Economics, Volume 106, Issue 3, August 1991, Pages 975–977, https://doi.org/10.2307/2937938 Published: 01 August 1991

Owners of business groups are often accused of expropriating minority shareholders by tunneling resources from firms where they have low cash flow rights to firms where they have high cash flow rights. In this paper we propose a general methodology to measure the extent of tunneling activities. The methodology rests on isolating and then testing the distinctive implications of the tunneling hypothesis for the propagation of earnings shocks across firms within a group. When we apply our methodology to data on Indian business groups, we find a significant amount of tunneling, much of it occurring via nonoperating components of profit.