Business Groups and Internal Capital Markets

Gönenç, Halit; Kan, Ozgur Berk; Karadagli, Ece C.

doi:10.2753/ree1540-496x430204

Cited by 33 publications

(28 citation statements)

References 22 publications

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“…Amato and Amato, 2004) or no relationship (e.g. Gonenc at al., 2007;Nakano and Nguyen, 2013;Niresh and Velnampy, 2014;Sciascia and Mazzola, 2008). In our study, we ask the question as to what is the association between manufacturing firms' size and their financial performance in Turkey.…”

Section: Introductionmentioning

confidence: 99%

The Effect of Firm Size on Profitability: Evidence From Turkish Manufacturing Sector

Işık¹,

Ünal²,

Ünal³

2017

Pressacademia

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Purpose -This study investigates whether size of 112 publicly listed firms in manufacturing sector affects their profitability in Turkey during the period 2005-2013. Methodology -Dynamic panel data approach (i.e. two-step system GMM estimator) taking into account potential endogeneity of firm-level variables is employed to estimate the effect of alternative firm size indicators on firm profitability. Findings-Estimation results suggest that after controlling for financial risk, liquidity level, growth opportunities, unsystematic risk, firm age, and the other factors, the indicators of firm size measured by firm's assets, sales and number of employees tend to have a positive influence on the profitability of firm measured by operating return on assets. Conclusion-There is enough statistical evidence to support a linear relation between firm size measures and profitability of firms in the period analyzed. However, our empirical results do not support the quadratic or cubic association between size measures and profitability.

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Section: Introductionmentioning

confidence: 99%

The Effect of Firm Size on Profitability: Evidence From Turkish Manufacturing Sector

Işık¹,

Ünal²,

Ünal³

2017

Pressacademia

View full text Add to dashboard Cite

show abstract

“…In line with prior business groups studies (e.g., Choi and Cowing, 1999;Gonenc et al, 2007;He et al, 2013;Lensink and van der Molen, 2010;Zhang, 2011; among others) we also use firmlevel control variables such as firms size, liquidity, sort-term debt, long-term debt, stock return volatility and firm age. Firm size is expressed as the natural logarithm of the book value of total assets.…”

Section: Dependent and Independent Variablesmentioning

confidence: 99%

“…In Turkey, Gonenc et al (2007) investigate whether the firms in business groups have created the internal capital market by comparing the performance of 123 affiliated firms and 77 unaffiliated firms that are listed on Istanbul stock exchange in 2000. Analysis results indicate that business group affiliation is associated with higher ROA but there is no meaningful linkage between business group affiliation and stock market performance (i.e.…”

Section: Review Of Related Studiesmentioning

confidence: 99%

“…In this way, the collected funds through internal capital markets are redistributed among member firms with the aim of using them more efficiently. This can allow the affiliates to meet the capital needs for financially constrained investment projects with high-profit potential and gain competitive advantages (Leff, 1978;Khanna and Yafeh, 2005;Gonenc et al, 2007). Third, when taken into account ownership structure of group firms, the presence of dominant shareholders in firms belonging to business groups can remedy for classical agency problem between professional managers and small shareholders on account of the monitoring effect (Fama and Jensen, 1983;Shleifer and Vishny, 1986).…”

Section: Introductionmentioning

confidence: 99%

“…Similar results are reported by Khanna and Rivkin (2001) for Argentina, George and Kabir (2008) for India, Gohar and Karacaer (2009) for Pakistan, Hernández-Trasobares and Galve-Górriz (2017) for Spanish. In addition to these results, empirical studies on many countries with different levels of institutional development reveal mixed results (i.e., positive, negative, or non-significant) regarding advantages of group membership in terms of accounting and stock market performance (see for example, Khanna and Palepu, 2000b;Chu, 2004;Lensink and Molen, 2010;He et al, 2013;Gunduz and Tatoglu, 2003;Gonenc et al, 2007;Selçuk, 2014;Carney et al, 2009;Zhang, 2011).…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Does Family Business Group Affiliation In Real Sector Firms Really Affect Their Performance?

Işık¹

2017

ASSRJ

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In this study, we empirically examine the performance effect of group affiliation by comparing the performance of firms that belong to family business groups with the performance of independent firms. For this purpose, we use a sample of 193 Turkish firms (i.e. 90 group affiliated firms and 103 non-group firms) quoted on the Istanbul Stock Exchange (Borsa Istanbul) during the 2005-2012 period. Based on ROA and Tobin's Q performance measures, the findings obtained from the FEVD estimator reveal that group membership does not always positively affect the financial performance of member firms. There exists a threshold effect of group affiliation, i.e. big group firms are better performers than both small group firms and stand-alone firms. Furthermore, when taken into account of firms' age, we find that positive effect of group affiliation is only valid for old group affiliated firms.

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Propping in the Pyramidal Business Groups in Turkey

Gürünlü¹

2018

J Corp Accounting Finance

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This article investigates the existence of propping in Turkish business group firms for the years 2010–2016 (150 firms and 1,050 firm‐year data in total). It is claimed that pyramidal ownership in Turkey is used to prop up intra‐group funds and is a beneficial vehicle providing a less costly way of financing. The empirical results of the research indicate the existence of propping in the Turkish business groups and bring a debt and dividends (debt service hypothesis) related explanation for the propping phenomenon in the pyramidal business groups. Accordingly, the key findings indicate that firms within the business group transfer funds to each other via debt and dividends channels in order to reduce financial distress. Hence, business groups in Turkey use pyramidal ownership as a financing vehicle to increase internal capital market funds and a substitute for incomplete financial markets. Propping provides an implicit insurance against bankruptcy risk. © 2018 Wiley Periodicals, Inc.

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Business Groups and Internal Capital Markets

Cited by 33 publications

References 22 publications

The Effect of Firm Size on Profitability: Evidence From Turkish Manufacturing Sector

The Effect of Firm Size on Profitability: Evidence From Turkish Manufacturing Sector

Does Family Business Group Affiliation In Real Sector Firms Really Affect Their Performance?

Propping in the Pyramidal Business Groups in Turkey

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