Propping: New Share Issues Of Pakistani Business Group Firms

2725 words - 11 pages

Introduction
In emerging market business groups could facilitate efficient allocation of capital and dominate economic activities (Bea, Kang, & Kim, 2002). Business groups consist of legally independent firms that may be interrelated by social ties and mostly owned by small group of shareholders called in many cases a family. In a pyramid, the ultimate owner uses indirect ownership to control large groups of companies because of chain of ownership in pyramid structure (Bertrand & Mullainathan, 2003). A pyramidal type of ownership structure within business groups allows families being at the top of such a pyramid to control firms in the group.
In particular, we analyze the nature of new share issues of Pakistan firms, focusing on patterns of cash rights by affiliated and non-affiliated firms during the period 2001–2007. In Section 2, we present a brief review of the literature on propping. Section 3 elaborates on the data and methodology. Section 4, we present the empirical findings, after which we summarize the findings and discuss the conclusions in Section 5.
Objectives of the Study
The objectives of the study are as follows:
1) To what extend propping exist in Pakistani Business Groups.
2) To investigate, if propping occurs in business groups then the performance of affiliated Business will be higher than the non-affiliated business.
Rationale
In this article we focus on examining up to what extent propping takes place in the context of Pakistani business groups. In propping funds are transferred from profitable business group firms to those who are in distress (Friedman, Johnson & Mitton, 2003). According to literature there is no study conducted on this phenomena of propping in Pakistan. Propping is a new concept in the context of Pakistani business Groups. Pakistan provides an interesting case to analyze such phenomena; because Pakistan groups in many cases have a pyramidal structure. At the same time, however, the extent to which propping takes place in the case of Pakistan has not been investigated in the literature.

Literature Review
In emerging economies, the investors could overcome the weak legal protection by taking advantage of their group structure through connected transactions. Controlling shareholders could choose between tunneling and propping depending on the magnitude of benefit (Peng, Wei, & Yang, 2006). The ownership structures in United States are simple in which they own other firms as subsidiary (Bertrand & Mullainathan, 2003). They also suggested that in tunneling the ownership and control separation in a pyramid generates high incentives and benefits for the ultimate owner to divert resources among firms. In a family of businesses a single shareholder completely controls several independent traded firms (Bertrand, Mehta, & Mullainathan, 2002). According to the Bae, Kang, and Kim (2002) study founded that in not well developed market a group could add value and facilitate...

Find Another Essay On Propping: New Share Issues of Pakistani Business Group Firms

Siemens Group: Analysis of Technology Management Using Relevant Theories/Models & Identification of Current Issues

8917 words - 36 pages Group competitive advantage in the future. Siemens' specialists are studying tomorrow's technological, economic and social trends in all its core areas and using their findings to determine key research areas and future business opportunities for the Group.One example of recent key technology developed by Siemens was the revolutionary TIM technology for Magnetic Resonance tomography, which helped the Group to gain additional market share from GE and

Products and Services of Our New Business

1169 words - 5 pages Products and Services of Our New Business The products that we are selling are cloths. Our products are going to be hats (trucker style), T-shirts, and stickers. The goal that we have put forth is to just get our products out there. Our products are going to be long lasting, durable, and very stylish. We plan on producing clothes that are made to the specifications of the consumer and to their style of liking

Importance of a Business plan and Issues with Start-up

1167 words - 5 pages noticeable trends and market functions. Surpassing the business elements, the most important factor in a decision to invest in a company is the quality of the people.4. Identify and discuss some of the legal issues with which entrepreneurs and small business owners are likely to be faced.In most states you have to obtain a local business license. Most states that have these make it relatively easy to obtain. Some states may require you to uphold

Causes and Effects of Communication Apprehension of New Members in a Group

5937 words - 24 pages could be for a group project, a group of friends, an organization, a business group, etc.- at some points of their lives. It was both intimidating and exciting to be a new part of a group. Ideally, the new member is expected to learn new names, internal information about the group, and must learn to cope up with the new environment in just a small amount of time. It was common to see new members quietly listening; hesitant on joining the

'Economics in the Business Environment'' Why is the structure of a market important if we wish to explain and predict the choices made by firms?

2253 words - 9 pages To understand why firms make the choices they do in the business environment we must understand the structure of the market which exists in competitive capitalism. It is important to be able to distinguish between types of markets to better understand how they behave in the real world.Why firms behave the way they do depends on a number of considerations, such as the number of buyers and sellers in market, and to what extent buyers being the

"A New Home with New Freedoms." Anthropological Essay on a group of Russian Immigrants living in a small town.

2254 words - 9 pages A New Home with New Freedoms. I did not have to travel far from home to research my subjects. In fact, it took just five minutes by automobile to pull onto the snow covered streets of Northfield Green. A small retirement community off Allen Avenue in Boston, MA, Northfield Green provides government subsidized housing, with a minimum age requirement for the occupant being 62 years of age. Although the majority of the senior citizens that the

Canadian Airlines was unsuccessful in their business venture due to their failure to plan for the future, poor business ventures, and refusal to accept their part of the market share.

1266 words - 5 pages future, poor business ventures, and refusal to accept their part of the market share. It was a direct result of these problems which cause the company to crash.Over the company's 13 years of existence they continually did not plan for the future. They made their decisions based on what was pertinent at that moment, more often than not using 'band-aid' solutions to solve complex problems. Canadian Airlines had continual problem with money and

The Role of Educational Institutions in New Business Trends

1158 words - 5 pages The Role of Educational Institutions in New Business Trends Jon-Arild Johannessen, a professor of Management and Innovation at Harstad University and Bjørn Olsen, a professor of Management and Organizational Behaviour at Bodø Graduate School of Business, Norway (2010) asserted “with this economic landscape, knowledge itself became a key factor of production—specifically, knowledge related to identifying and exploiting new ways to

The Role of Educational Institutions in New Business Trends

1163 words - 5 pages Jon-Arild Johannessen, a professor of Management and Innovation at Harstad University and Bjørn Olsen, a professor of Management and Organizational Behaviour at Bodø Graduate School of Business, Norway (2010) asserted “with this economic landscape, knowledge itself became a key factor of production—specifically, knowledge related to identifying and exploiting new ways to establish temporary competitive advantage” (p. 502). However, consider

Start Up of a New Christian Based Business

1427 words - 6 pages With the startup of our new business comes many different emotions; excitement, anticipation, and nervousness. What will the future hold for us and how can we build the foundation to be a sustainable business. In thinking through these things, we have to ask ourselves what our challenges will be. There are three challenges that we believe we will face here in our first year of business. As a Christian based company in the janitorial business we

The Possibilities of Expanding the Business into New Overseas Markets

3347 words - 13 pages The Possibilities of Expanding the Business into New Overseas Markets As international marketing consultant of Mackie’s of Scotland, the ice cream maker, it is my duty to consider the possibilities of expanding the business into new overseas markets, successfully. The Scottish ice cream market will be researched thoroughly. The UK target market of Mackie’s will be analysed. Finally a suitable country will be chosen to market the product

Similar Essays

The Business Strategy Of Loreal Group

2488 words - 10 pages advantages, R&D contributes invaluably to the innovation efficacy, quality and safety of the product and introduces one or two new products each year. Most companies these days are rely on innovation to build competitive advantage and increase market share. The technology that L’Oréal Today's cosmetic market is driven by innovation including new colour pallets, treatments targeted to specific skin types and unique formulas concentrating on different

The Strategic Analysis Of Easy Jet And Easy Group The Analysis Of Organisational Assets And Growth Share Matrix Analysis For The Easy Group

3754 words - 15 pages second one is by constructing a Growth-share Matrix for the Easy Group to better understand the balance portfolios of its different Easy companies in it and then the core competence of Easy group will be discussed in detailed.Part One1. The overview of easyJet's assets:1.1 Physical assetseasyJet is based at easyLand, a bright orange building adjacent to the main taxiway at Luton Airport. In an industry where corporate HQs are generally considered

Business Finance Is Concerned With The Investment And Financing Decision Of Firms. All Investment Must Be Financed.

3784 words - 15 pages Business FinanceIntroductionBusiness finance is concerned with the investment and financing decision of firms. All investment must be financed. Firm raise their finance in various ways; through short term and long term funds. Because resources in this world are scarce, investment involves choice and sacrifice. The firm must choose between rival projects; by choosing some it forgoes others. Since the firm is owned by shareholders, it is expected

Discuss The Goals Of A Firm And Analyse The Issues That Impact On The Ability Of Australian Firms To Engage In External Economies Of Scale.

1240 words - 5 pages , meeting shareholder expectations, increasing market share, maximising growth or satisficing behaviour are some of the goals or objectives that a firm may employ. The objective of maximising profits appears to apply to the majority of firms within the economy. To maximise revenue whilst achieving minimum production costs results with maximum profits. However, maximum profits are not the only goals of a firm to increase market share and to