Coinsurance within business groups: evidence from related party transactions in an emerging market

Nan Jia, Jing Shi, Yongxiang Wang

Research output: Contribution to journalArticlepeer-review

54 Citations (Scopus)

Abstract

Using novel transaction-level data on Chinese business groups, this study provides the first direct evidence of the coinsurance theory of business groups by investigating when different types of internal resources are transferred within a business group. We find that in Chinese business groups, a credit crunch experienced by the controlling shareholding firm (the “controller”) of a publicly listed firm increases the loan-based related party transactions (RPTs) including loan guarantees and intercorporate loans provided by the listed firm to the controller. In turn, when the listed firm's performance dips, the controller and its son firms provide more support to the listed firm in the form of non-loan-based RPTs. These findings directly show the dynamic interactions of members within business groups.
Original languageEnglish
Pages (from-to)2295-2313
Number of pages19
JournalManagement Science
Volume59
Issue number10
DOIs
Publication statusPublished - Oct 2013
Externally publishedYes

Keywords

  • organizational studies
  • strategy
  • industrial organization
  • firm objectives
  • organization and behavior

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