The deep-pocket effect of internal capital markets

Arbeitspapier

We provide evidence suggesting that incumbents' access to group deep pockets has a negative impact on entry in product markets. Relying on a unique French data set on business groups, our paper presents three major findings. First, the amount of cash holdings owned by incumbent-affiliated groups is negatively related to entry in a market. Second, the impact on entry of group deep pockets is more important in markets where access to external funding is likely to be more difficult. Third, the entry deterring effect of group deep pockets is more pronounced when groups have more active internal capital markets. Our findings suggest that internal capital markets operate within corporate groups and that they have a potential anti-competitive effect.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Nota di Lavoro ; No. 108.2009

Classification and Topics

• Classification: Wirtschaft ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Corporate Finance and Governance: Government Policy and Regulation ; Monopolization; Horizontal Anticompetitive Practices
• Subject: Business Groups ; Cash Holdings ; Internal Capital Markets ; Deep-Pockets ; Market Entry

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Boutin, Xavier ; Cestone, Giacinta ; Fumagalli, Chiara ; Pica, Giovanni ; Serrano-Velarde, Nicolas
• Event: Veröffentlichung
• (who): Fondazione Eni Enrico Mattei (FEEM)
• (where): Milano
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/53263
• Last update: 10.03.2025, 11:45 AM CET