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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