AFFILIATION AND FIRM PERFORMANCE: EVIDENCE FROM INDIAN BUSINESS GROUPS

Using data on a sample of Indian firms from 1996 to 2006, we examine the effect of group affiliation on firm performance. After controlling for the differences in firm size, growth opportunities and leverage, the findings indicate that group affiliation exerts a salutary impact on firm performance, measured in terms of adjusted Q or return on assets. Moreover, the evidence indicates that tunnelling is not an important factor driving the valuation and profitability effect of group affiliation. Copyright � 2010 The Author. Journal compilation � 2010 Blackwell Publishing Ltd and The University of Manchester.