@article{779fefe7a33142f29703efa41d8347a5,
title = "How do internal capital markets work? Evidence from the great recession",
abstract = "We study the inner workings of internal capital markets during the 2008-09 recession using a unique dataset of loans between business group firms in an emerging market. Intragroup loans increase quickly during the recession. Firms that are more central in the ownership network simultaneously increase lending and borrowing. Acting like simple intermediaries, central firms do not increase net lending. Our results imply that formal control rights are essential for intermediation in internal capital markets, particularly during distress. In line with previous results on winnerpicking, receivers of intragroup loans are high-Q, financially constrained firms, which also perform significantly better than providers during the recession.",
author = "David Buchuk and Borja Larrain and Mounu Prem and Infante, {Francisco Urzua}",
note = "Funding Information: * We thank comments and suggestions from an anonymous referee, Jan Bena (FinanceUC discuss-ant), Arun Chandrasekhar, Raja Kali, Pepita Miquel-Florensa, Carlos Pombo, Carlos Ram{\'i}rez, Giorgo Sertsios, Andrei Shleifer, Adam Szeidl, Geoff Tate (editor), and seminar participants at the 12th International Conference of FinanceUC, the 6th Annual CIRANO-Sam M. Walton College of Business Workshop on Networks in Trade and Finance, Universidad de los Andes, and Universidad del Rosario. This article circulated previously with the title “Overlapping Networks of Credit and Control.” B.L. acknowledges funding from Proyecto Fondecyt Regular 1180593. Buchuk acknowl-edges funding from Proyecto Fondecyt Iniciaci{\oe}n 11190642. Publisher Copyright: {\textcopyright} 2019 The Author(s). Published by Oxford University Press on behalf of the European Finance Association. All rights reserved.",
year = "2020",
doi = "10.1093/ROF/RFZ022",
language = "English (US)",
volume = "24",
pages = "847--889",
journal = "Review of Finance",
issn = "1572-3097",
publisher = "Oxford University Press",
number = "4",
}