Business groups and corporate transparency in emerging markets: Empirical evidence from India |
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Authors: | Chinmay Pattnaik James Jinho Chang Hyun Han Shin |
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Affiliation: | 1. Discipline of International Business, The University of Sydney Business School, N434 Storie Dixson Wing Building H10, Sydney, NSW, 2006, Australia 2. Yonsei School of Business, Yonsei University, Seodaemun-gu, Seoul, 120-749, Korea
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Abstract: | This study examines the difference in corporate transparency of firms affiliated with business groups and unaffiliated firms in India. Based on previous studies we measured corporate transparency using equity analysts’ forecast error and dispersion. We find that firms affiliated with business groups are less transparent than unaffiliated firms. Lack of transparency leads to higher analyst forecast error and dispersion. This study also finds that business group-affiliated firms with more intra-group capital transactions have higher forecast error and dispersion. The findings of this study suggest that firms affiliated with business groups are less transparent due to their reliance on internal capital markets, and therefore lack incentives to disclose information to market participants. As a result, the information asymmetry between business groups and the capital market is higher, restricting the activities of information intermediaries such as equity analysts, who play an important role in the external capital market. |
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