| This dissertation extends a structural model of investment with costly external finance to group firms, derives an empirical regression counterpart, and uses it to test for the existence of internal capital markets in business groups. The dissertation also tests for various characteristics of a group that tend to affect within-group resource allocation. I use a unique firm-level data submitted to Thailand's Ministry of Commerce as a sample in the empirical sections. The results show that control rights, the number of firms in a group, and within-group intermediaries facilitate the efficiency of within-group resource allocation. Corporate laws and regulations that protect minority shareholders lead to less within-group efficiency. Industry diversification has no effect on within-group resource allocation. In sum, the paper provides evidence from micro data that the structure of business groups and corporate governance are related to the investment decision of firms. |
