Business, Management and Accounting
5 years ago

Business groups boost financial performance through higher leverage and risk-sharing.

Journal of Finance and Accounting Research
Does corporate groups accrue higher leverage: Emerging Market Evidence
Safi Ullah Khan, Mohammad Faisal Rizwan

Paper Summary

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Business groups tend to have higher debt levels than non-group companies. This is because group members share risks and resources, helping each other out financially. Business groups act like their own internal banks, making it easier for their companies to get money when they need it. Overall, companies in business groups tend to do better financially than those that aren't part of a group.