Allocating Risk Across Pyramidal Tiers: Evidence from Thai Business Groups

Pramuan Bunkanwanicha, Yupana Wiwattanakantang () and ユパナ ウィワッタナカンタン

No 2007-14, CEI Working Paper Series from Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University

Abstract: This paper shows that pyramidal ownership can be used to control downside risk. The research setting is Thailand before and after the 1997 Asian crisis. The focus is on family business groups that owned banks. The results show that the controlling family pursues different investment strategies for banks across pyramidal tiers in order to mitigate the entire group risk. Lower tier banks are used to undertake risky loans, while upper tier banks carry out more profitable investments. After the crisis hit, upper tier banks survived and almost all lower tier banks went bankrupt. By letting lower tier banks fail, the controlling family was able to save the rest of the group's firms.

Keywords: Pyramids; Business groups; Family Firms; Banks; Corporate Governance; Emerging markets; Thailand (search for similar items in EconPapers)
JEL-codes: G21 G38 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2008-04
Note: April 22, 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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