Synchronicity and firm interlocks in an emerging market.

By Tarun Khanna, Catherine Thomas. 2009

124 citations recorded by the source corpus.

Stock price synchronicity has been attributed to poor corporate governance and a lack of firm-level transparency. This paper investigates the association between different kinds of firm interlocks, control groups, and synchronicity in Chile. A unique data set containing equity cross-holdings, common individual owners, and director interlocks is used to map out firm ties and control groups. While there is a correlation between synchronicity and share ownership and equity ties, synchronicity is more strongly correlated with interlocking directorates. The presence of share directors is associated with either reduced firm-level transparency or increased correlation in firm fundamentals--due, for example, to joint resource allocation across the firms.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/3fd1f0d59efc89f5dab3a47973d62ab5c80283a1

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Citations in the corpus

When Does Prior Experience Pay? Institutional Experience and the Multinational Corporation (2014, unknown): “I also included an indicator variable of whether the subsidiary was affiliated with a business group (0/1), as previous studies have revealed that business group affiliations can affect firm performance (Khanna and Rivkin, 2001; Chang, 2003; Khanna and Thomas, 2009).”
R2 and Idiosyncratic Risk are not Interchangeable (2014, background): “Cross-Firm Khanna and Thomas (2009) investigate the association between different kinds of ﬁrm interlocks, control groups, and synchronicity in Chile.”
Corporate finance and governance in emerging markets: A selective review and an agenda for future research (2011, background): “The firms can be connected through informal relationships of their key personnel, such as throughmarriages (Bunkanwanicha et al., 2009), blood ties, school ties, job relationships (Khanna and Thomas, 2009), and so on.”
The Internal Capital Markets of Business Groups: Evidence from Intra-Group Loans (2014, unknown): “1 Because of the relative transparency of Chilean business groups they have been studied before in terms of the benefits of group diversification (Khanna and Palepu, 2000), the synchronization of stock returns and firm interlocks (Khanna and Thomas, 2009), and board compensation (Urzua, 2009), among”
Institutions and Organizational Structure: The Case of State-Owned Corporate Pyramids (2013, background): “” More recently, Khanna and Thomas (2009) find information sharing among firms affiliated by interlocking”
Profiting from Government Stakes in a Command Economy: Evidence from Chinese Asset Sales (2010, methodology): “8 This measure is now widely used in finance research; see Khanna and Thomas (2008) for one recent example.”