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Value added or tunneling? Evidence from new product announcements by Taiwanese business groups

  • Shao-Chi Chang (a1) and I-Fen Chen (a1)


Using new product announcement events made by group member firms in Taiwan, this study examines whether the firms’ multiple network ties within business groups benefit member firms or whether they provide a channel for controlling shareholders to tunnel. We find that the announcement of new products by group member firms has a positive effect on the market value of other, non-announcing group peers. This evidence is consistent with the value-added hypothesis. More importantly, this effect is stronger when member firms are connected via equity ties. Furthermore, we also offer an original analysis of how family control in business groups affects the impact of network ties on value creation. Our results suggest that the controlling family may discount the market value of member firms.

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