Business Groups and Firm-specific Stock Returns


Speaker


Abstract

In lower income economies, stocks co-move more and business groups are more prevalent. This study connects these two findings by showing that business group affiliated firms’ stock returns exhibit less firm-specific volatility than do the returns of unaffiliated firms. We use shocks to global commodity prices to hold the characteristics of shocks constant across firms. We show that commodity shocks move group affiliates’ shares significantly less than unaffiliated firms’ shares in the same industry and economy. Identification follows from difference-in-difference tests exploiting control block transactions and matching with firms subject to control block bids that failed for exogenous reasons.