Title: The Benefits and Costs of Internal Markets: Evidence from Asia's Financial Crisis
Abstract: This study examines the role of internal capital markets and diversification during normal and turbulent times. We hypothesize that internal markets are more valuable for firms in countries with less-developed financial markets and that diversification generally reduces risk. To conduct our tests, we study 3,000 East Asian corporations over the period before and during the 1997-1998 financial crisis. We find support for the internal market hypothesis during normal times. We find, however, that more diversified firms perform worse during a crisis, especially in less-developed countries. This suggests that more diversification and greater usage of internal markets is associated with higher risk-taking, especially when external markets are less developed.
Publication Year: 2003
Publication Date: 2003-01-01
Language: en
Type: article
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Cited By Count: 11
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