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Internal Capital Markets in Business Groups and the Propagation of Credit Supply Shocks
by Yu Shi, Robert M. Townsend, and Wu Zhu

Series:Working Paper No. 19/111
ISBN 9781498314411
Code: #WPIEA2019111

Publication year: 2019

Cdn: $27.00; US: $25.00
Paperback
Language: English
39 pages
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Using business registry data from China, we show that internal capital markets in business groups can propagate corporate shareholders’ credit supply shocks to their subsidiaries. An average of 16.7% local bank credit growth where corporate shareholders are located would increase subsidiaries investment by 1% of their tangible fixed asset value, which accounts for 71% (7%) of the median (average) investment rate among these firms. We argue that equity exchanges is one channel through which corporate shareholders transmit bank credit supply shocks to the subsidiaries and provide empirical evidence to support the channel.
Internal Capital Markets in Business Groups and the Propagation of Credit Supply Shocks
Cdn: $27.00; US: $25.00
International Monetary Fund (IMF) BookID: 125110 Added: 2019.6.14