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Identifier to cite or link to this item: https://hdl.handle.net/10086/13892

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Title
Financially Interlinked Business Groups
Creator
Creator Name
Ghatak, Maitreesh Ghatak, Maitreesh
Affiliation
Affiliation Name
University of Chicago
Creator Name
Kali, Raja Kali, Raja
Affiliation
Affiliation Name
University of Arkansas
Editor
Contributor Name
Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University
Key Word
business groups
cross-holding of debt and equity
financial interlinkage
JEL
G30
L14
D82
O16
Abstract
Financial interlinkage, in the form of cross-holding of equity and debt between firms, characterize business groups in many countries. We suggest that such financial interlinkage can be viewed as a way to solve credit rationing caused by asymmetric information. If firms possess better information about each other than a bank, then business groups can be a mechanism to induce firms to sort on the basis of this information. Banks can offer a menu of contracts that vary in the extent of financial interlinkage to induce firms to self-select on the basis of the equilibrium composition of the business groups they can form.
Description
May 24, 2001
Publisher
Institute of Economic Research, Hitotsubashi University
Issued Date
2002-09
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
CEI Working Paper Series ; No. 2002-5
Relation
Related Identifier
URI
  http://cei.ier.hit-u.ac.jp/index.html
NCID
AA11590659
Number of Pages
36
Appears in Collections
CEI Working Paper Series
URL
https://hdl.handle.net/10086/13892