Contagion Effects of Equity Financing Announcements Within Business Groups

Abstract

We examine whether announcements of financing decisions by group-affiliated firms have any spillover effects on the value of their member firms. Employing data on rights offerings, private placements of equity, and follow-on public offerings by group-affiliated firms in India, we find that a positive (negative) market reaction to the announcement of a financing decision by a group-affiliated firm also leads to a positive (negative) market reaction for non-event firms within the same business group. Further, this contagion effect is stronger for the group’s leading firms, firms that announce relatively large issues of equity, and financially constrained firms. Our results are robust to several checks as well as alternative measures of our main variables of interest.

Keywords: Business groups, Contagion effects, Equity issues, Financing decisions, Spillover effects, Event study

Presented at:

• Dec 2025 – Australasian Finance & Banking Conference, organised by the Institute of Global Finance, UNSW Business School
• Dec 2025 – The Sydney Banking and Financial Stability Conference (SBFC), organized by the University of Sydney Business School, Sydney, Australia
• Dec 2025 – India Management Research Conference (IMRC 2025), organized by IIM Ahmedabad
• Dec 2025 – Emerging Markets Conference 2025, organised by the XKDR Forum in collaboration with Vanderbilt Law School
• Jun 2025 – Research Symposium on Finance and Economics (RSFE 2025), organized by IFMR GSB, Krea University
• May 2025 – 47th Annual Congress of the European Accounting Association, hosted by Luiss Guido Carli University, Rome, Italy
• Apr 2025 – BAFA Annual Conference 2025, organised by the British Accounting & Finance Association at Ulster University, Belfast, Northern Ireland
• Feb 2025 – IIMU Research Day 2025, hosted by IIM Udaipur
• Jan 2025 – JCAE Annual Symposium 2025, organised by the Journal of Contemporary Accounting & Economics and the Manipal Academy of Higher Education, India
• Dec 2024 – India Finance Conference (IFC) 2024, jointly organized by IIMA, IIMB, and IIMC at IIM Raipur
• Dec 2024 – International Finance and Accounting Conference (IFAC) 2024, organized by IIM Jammu in collaboration with CFA Institute
• Nov 2024 – International Corporate Governance Society (ICGS) Conference 2024, organized by the International Corporate Governance Society at Arizona State University, Tempe, Arizona
• Nov 2024 – CGIR Paper Development Workshop, organized by the International Corporate Governance Society