Business groups and the incorporation of firm-specific shocks into stock prices |
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| Authors: | Mara Faccio Randall Morck M Deniz Yavuz |
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| Institution: | 1. Purdue University, Krannert School of Management, 403W. State Street, West Lafayette, IN 47907, United States;2. Asian Bureau of Finance and Economics Research, NUS Business School, BIZ 2 Storey 4, #04-05 1 Business Link 117592, Singapore;3. European Corporate Governance Institute, c/o the Royal Academies of Belgium, Palace of the Academies, Rue Ducale 1 Hertogsstraat, 1000 Brussels, Belgium;4. National Bureau of Economic Research, 1050 Massachusetts Ave, Cambridge MA 02138, United States;5. University of Alberta, Alberta School of Business, 4-20K Business Building, Edmonton, AB T6G 2R6, Canada;1. Rotterdam School of Management, Erasmus University, Department of Finance, Burgemeester Oudlaan 50, P.O. Box 1738, DR Rotterdam 3000, the Netherlands;2. KU Leuven, Faculty of Economics and Business (FEB), Antwerp Carolus Campus, Korte Nieuwstraat 33, Antwerp 2000, Belgium;3. The Liquid House, Aalmoezenierstraat 13, Antwerp 2000, Belgium;1. Oslo Metropolitan University, Oslo Business School, Pilestredet 46, Oslo 0130, Norway;2. The Arctic University of Norway, Hansine Hansens veg 18, Tromsø N-9019, Norway;3. Department of Banking and Finance, Monash University, 900 Dandenong Rd., Caulfield East VIC 3145, Australia;1. Harvard University, 1805 Cambridge Street, Cambridge MA 02138, United States;2. Federal Reserve Board, 20th and C Streets NW, Washington D.C. 20551, United States;1. Lundquist College of Business, University of Oregon, Eugene, OR 97403, United States;2. Department of Business & Information Technology, Missouri S&T, Rolla, MO 65409, United States;1. 258 Mendoza College of Business, University of Notre Dame, Notre Dame, IN 46556, USA;2. Olin Business School, Washington University in St. Louis, Simon Hall, One Brookings Drive, St. Louis, MO 63130, USA;3. Division of the Humanities and Social Sciences, California Institute of Technology, 1200 E. California Blvd., Pasadena, CA 91125, USA |
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| 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. |
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