Get access

Conglomerate Structure and Capital Market Timing


  • We thank Eric de Bodt, Bill Christie (editor), Sudipto Dasgupta, Armen Hovakimian, Chuan Yang Hwang, Jun-Koo Kang, Clive Lennox, Laura Liu, Wei-Lin Liu, Peter McKay, Pascal Nguyen, Wei-Ling Song, Xueping Wu, Yishay Yafeh, An Yan, an anonymous referee, and seminar participants at the 2006 International Banking and Finance Conference, the 2006 Asian FA/FMA Conference, the 2006 FMA Annual Meeting, the 14th Conference on the Theories and Practices of Securities and Future Markets, the 2007 EFA Annual Conference, the 2008 Asian FA Conference, Hitotsubashi University, Hong Kong Baptist University, and Hong Kong Polytechnic University for their valuable comments on our manuscript. This research was completed while Professor Hilary was on faculty at HKUST and HEC Paris. All remaining errors are ours.


We examine the effects of keiretsu structure on capital market-timing. Keiretsu groups offer a hybrid structure between fully integrated conglomerates and stand-alone firms. We find that past market conditions affect the capital structure of keiretsu firms more than they affect the capital structure of unaffiliated firms. The decision to issue equity is more correlated with market conditions for keiretsu members than it is for unaffiliated firms. The stock returns of keiretsu firms following the issuance of equity decrease with the size of the issuance. These results suggest that keiretsu members time the issuance of equity more so than stand-alone firms.