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AFFILIATION AND FIRM PERFORMANCE: EVIDENCE FROM INDIAN BUSINESS GROUPS

Authors

  • SAIBAL GHOSH

    1. Department of Economic Analysis and Policy, Reserve Bank of India
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    • Manuscript received 29.01.08; final version received 07.12.08.

    •  

      I would like to thank, without implicating, two anonymous referees, for the comments on an earlier draft, which greatly improved the analysis and exposition. The views expressed and the approach pursued in the paper reflect the personal opinion of the author.


Abstract

Using data on a sample of Indian firms from 1996 to 2006, we examine the effect of group affiliation on firm performance. After controlling for the differences in firm size, growth opportunities and leverage, the findings indicate that group affiliation exerts a salutary impact on firm performance, measured in terms of adjusted Q or return on assets. Moreover, the evidence indicates that tunnelling is not an important factor driving the valuation and profitability effect of group affiliation.

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