Group affiliation and North American firms' value

Abstract

Purpose

This paper aims to assess the impact of group affiliation and anticipated expropriation on North American firms' value.

Design/methodology/approach

The net impact of firms' affiliation to groups is generally far from evident. While group affiliation can be perceived as positive news because of the benefits of internal capital markets, the fear of expropriation of minority interests by large shareholders can mitigate such benefits. This commands some empirical investigations, which are done in this paper through statistical analyses.

Findings

The results indicate that group affiliation has a positive and significant impact on North American firms' value and, more specifically, on US firms' value. The negative impact of the anticipated expropriation of minority shareholders mainly comes from divergence in ownership and voting rights between the first and second ultimate owners. Group affiliation, then, is valuable, even in countries with well‐organized capital markets. The results may explain the current wave toward mergers and acquisitions.

Originality/value

The paper provides useful information on the impact of group affiliation and anticipated expropriation on North American firms' value.

Citation

Gadhoum, Y., Gueyié, J. and Zoubeidi, M. (2007), "Group affiliation and North American firms' value", Corporate Governance, Vol. 7 No. 1, pp. 41-53. https://doi.org/10.1108/14720700710727104