The effect of group affiliation on the risk-taking of Japanese firms

Nguyen, P; Nivoix, S

The effect of group affiliation on the risk-taking of Japanese firms

Nguyen, P Nivoix, S

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Publication Type:: Journal Article
Citation:: Applied Financial Economics, 2009, 19 (2), pp. 135 - 146
Issue Date:: 2009-01-22

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Field	Value	Language
dc.contributor.author	Nguyen, P	en_US
dc.contributor.author	Nivoix, S	en_US
dc.date.issued	2009-01-22	en_US
dc.identifier.citation	Applied Financial Economics, 2009, 19 (2), pp. 135 - 146	en_US
dc.identifier.issn	0960-3107	en_US
dc.identifier.uri	http://hdl.handle.net/10453/9953
dc.description.abstract	This article examines the role of keiretsu (i.e. business group) affiliation on the risk-taking of Japanese firms. We find that total risk, measured by firm-level stock price volatility, is not significantly affected by keiretsu membership. The reason is that affiliated firms are characterized by lower idiosyncratic risk along with higher systematic risk. However, idiosyncratic risk varies across business groups and appears to depend upon the firm's inclination towards its group. In contrast, the higher systematic risk of group affiliates is significant for each keiretsu and every degree of group inclination. Moreover, this result remains after adjusting risk for firm characteristics and industry effects. Hence, the consequence of group affiliation may more accurately be described by higher systematic risk. This result could reflect the weaker competitive position of keiretsu affiliates.	en_US
dc.relation.ispartof	Applied Financial Economics	en_US
dc.relation.isbasedon	10.1080/09603100701765208	en_US
dc.subject.classification	Finance	en_US
dc.title	The effect of group affiliation on the risk-taking of Japanese firms	en_US
dc.type	Journal Article
utslib.citation.volume	2	en_US
utslib.citation.volume	19	en_US
utslib.for	140207 Financial Economics	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Strength - CCG - Centre for Corporate Governance
utslib.copyright.status	open_access
pubs.issue	2	en_US
pubs.publication-status	Published	en_US
pubs.volume	19	en_US

Abstract:

This article examines the role of keiretsu (i.e. business group) affiliation on the risk-taking of Japanese firms. We find that total risk, measured by firm-level stock price volatility, is not significantly affected by keiretsu membership. The reason is that affiliated firms are characterized by lower idiosyncratic risk along with higher systematic risk. However, idiosyncratic risk varies across business groups and appears to depend upon the firm's inclination towards its group. In contrast, the higher systematic risk of group affiliates is significant for each keiretsu and every degree of group inclination. Moreover, this result remains after adjusting risk for firm characteristics and industry effects. Hence, the consequence of group affiliation may more accurately be described by higher systematic risk. This result could reflect the weaker competitive position of keiretsu affiliates.

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http://hdl.handle.net/10453/9953