Crises as Opportunities for Growth: The Strategic Value of Business Group Affiliation

Crises as Opportunities for Growth: The Strategic Value of Business Group Affiliation

Ronald Masulis, Peter K. Pham, Jason Zein, Alvin E.S. Ang

Series number :

Serial Number: 
781/2021

Date posted :

August 31 2021

Last revised :

September 24 2021
SSRN Share

Keywords

  • Family Business Groups • 
  • Product-market competition • 
  • financial crisis

We document a novel strategic motive for family business groups to utilize their internal capital markets (ICMs) during financial crises. We find that crisis-period group ICM activity is targeted toward exerting product market dominance over standalone rivals.

Groups make significant post-crisis gains in market share that are concentrated among affiliates (and industry segments within affiliates) operating in highly competitive product markets, where capturing such gains is difficult in normal times. These patterns are observed only in emerging markets, suggesting that ICMs enable groups to exploit crises to realize long-term competitive advantages only when rivals face chronic financing frictions.

Authors

Real name:
Alvin E.S. Ang
Real name:
Peter K. Pham
Real name:
Jason Zein