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Business groups and the incorporation of firm-specific shocks into stock prices

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  • Faccio, Mara
  • Morck, Randall
  • Deniz Yavuz, M.

Abstract

Firm-specific information has a damped effect on business group-affiliated firms’ stock prices. Such firms’ idiosyncratic stock returns are less responsive to idiosyncratic commodity price shocks than are the idiosyncratic returns of otherwise similar unaffiliated firms in the same country and commodity-sensitive industry. Using global commodity shocks means we assess responses to common idiosyncratic shocks of the same magnitude, frequency, and observability. Further identification follows from difference-in-difference tests exploiting successful and matched exogenously failed control block transactions. We conclude that business group firms’ stock prices provide less firm-specific information to capital providers and managers.

Suggested Citation

  • Faccio, Mara & Morck, Randall & Deniz Yavuz, M., 2021. "Business groups and the incorporation of firm-specific shocks into stock prices," Journal of Financial Economics, Elsevier, vol. 139(3), pages 852-871.
    • Handle: RePEc:eee:jfinec:v:139:y:2021:i:3:p:852-871
    DOI: 10.1016/j.jfineco.2020.09.005
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    More about this item

    Keywords

    Business groups; Incorporation of firm-specific information; Economic growth;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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