Internal capital markets, ownership structure, and investment efficiency: Evidence from Taiwanese business groups

James Juichia Lin*, Yin Hua Yeh

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

This study uses a unique data set to thoroughly investigate how the financing provided by a business groups' internal capital markets and control-enhancing ownership structure relate to investment efficiency. We find that group-affiliated firms that make more intensive use of related-party transactions that facilitate an internal capital market exhibit a reduced probability of under-investment. We also find that pyramidal (cross) ownership improves (weakens) investment efficiency suggesting different types of control-enhancing structure have strongly contrasting effects on investment efficiency. These findings reveal both the financing advantages and disadvantages of business groups.

Original languageEnglish
Article number101284
JournalPacific Basin Finance Journal
Volume60
DOIs
StatePublished - Apr 2020

Keywords

  • Business groups
  • Cross shareholding
  • Internal capital market
  • Pyramidal shareholding

Fingerprint Dive into the research topics of 'Internal capital markets, ownership structure, and investment efficiency: Evidence from Taiwanese business groups'. Together they form a unique fingerprint.

  • Cite this