Publication Type
Journal Article
Version
publishedVersion
Publication Date
6-2022
Abstract
Using global cross-firm ownership data, we find that both stock returns and cash-flow news of ownership-linked firms predict focal firm's returns for all types of ownership structures: subsidiary-parent, parent-subsidiary, subsidiary-subsidiary, and parent-parent. This effect, observed only after the establishment of cross-firm ownership, is not subsumed by focal firm or industry momentum, or alternative inter-firm relations, including customer-supplier links and shared analyst coverage. Our findings are explained by mispricing due to internal capital markets - a mechanism unique to complex ownership firms. Higher internal capital market activity among ownership-linked firms also induces larger investments and lower external financing of the focal firm.
Keywords
Capital expenditures, Earnings surprises, Market inefficiency, Multinational enterprises, Ownership network
Discipline
Finance | Finance and Financial Management
Research Areas
Finance
Publication
Journal of Corporate Finance
Volume
74
First Page
1
Last Page
22
ISSN
0929-1199
Identifier
10.1016/j.jcorpfin.2022.102219
Publisher
Elsevier
Citation
CHANG, Ran; GONZALEZ, Angelica; SARKISSIAN, Sergei; and Jun TU.
Internal capital markets and predictability in complex ownership firms. (2022). Journal of Corporate Finance. 74, 1-22.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/7174
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jcorpfin.2022.102219