A Reexamination of Tunneling and Business Groups: New Data and New Methods

One of the most rigorous methodologies in the corporate governance literature uses firms’ reactions to industry shocks to characterize the quality of governance. This methodology can produce the wrong answer unless one considers the ways firms compete. Because macro-level shocks reverberate differently at the firm level depending on whether a firm has a cost structure that requires significant adjustment, the quality of governance can only be...