Review of Financial Studies Vol. 37 No. 1 2023
Business Group Spillovers
open access
Abstract
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.
- DOI
- 10.1093/rfs/hhad057
- Volume
- 37
- Issue
- 1
- Pages
- 231-264
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref