NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Raffaele Santioni

Bank of Italy
Via Nazionale 91, 00184
Rome, Italy

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NBER Working Papers and Publications

June 2017Internal Capital Markets in Times of Crisis: The Benefit of Group Affiliation in Italy
with Fabio Schiantarelli, Philip E. Strahan: w23541
Italy’s economic and banking systems have been under stress in the wake of the Global Financial Crisis and Euro Crisis. Firms in business groups have been more likely to survive this challenging environment, compared to unaffiliated firms. Better performance stems from access to an internal capital market, and the survival value of groups increases, inter alia, with group-wide cash flow. We show that actual internal capital transfers increase during the crisis, and these transfers move funds from cash-rich to cash-poor firms and also to those with more favorable investment opportunities. The ability to borrow externally provides additional funds that are shared across group affiliated firms. Our results highlight the benefits of internal capital markets when external capital markets ar...
 
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