Browsing by Author "Lin, James Juichia"

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Internal capital markets, ownership structure, and investment efficiency: Evidence from Taiwanese business groups
(2020-04-01)
Lin, James Juichia
;
Yeh, Yin-Hua
;
資訊管理與財務金融系註：原資管所+財金所
;
Department of Information Management and Finance
This study uses a unique data set to thoroughly investigate how the financing provided by a business groups' internal capital markets and control-enhancing ownership structure relate to investment efficiency. We find that group-affiliated firms that make more intensive use of related-party transactions that facilitate an internal capital market exhibit a reduced probability of under-investment. We also find that pyramidal (cross) ownership improves (weakens) investment efficiency suggesting different types of control-enhancing structure have strongly contrasting effects on investment efficiency. These findings reveal both the financing advantages and disadvantages of business groups.
Investment-cash flow sensitivity to internal capital markets and shareholding structure: evidence from Taiwanese business groups
(1970-01-01)
Yeh, Yin-Hua
;
Lin, James Juichia
;
資訊管理與財務金融系註：原資管所+財金所
;
Department of Information Management and Finance
This study examines to what extent investment-cash flow sensitivity in business groups' is affected by internal capital markets (characterized by related-party transactions) and shareholding structure. We approach the subject by exploring potential financing advantages as contrasted with the agency problem. Using a hand-collected data set to quantify related-party transactions and classify control-enhancing structures, we find that group-affiliated firms with a higher scale of related-party transactions have lower levels of investment-cash flow sensitivity. Further, our results show that related-party transactions are both associated with investment opportunity and the type of shareholding structure, which support both financing advantage and agency hypotheses. The evidence shows that business groups transfer intra-group capital from low-growth to high-growth member firms, but it also demonstrates that the outcomes of these transfers are affected by the type of control-enhancing structure. Additional analysis shows that the agency problem tends to dominate the financing advantage effect in cross-shareholding structures, which leads to overinvestment.