The Conglomerate Network

55 Pages Posted: 19 Apr 2021 Last revised: 7 May 2021

See all articles by Kenneth R. Ahern

Kenneth R. Ahern

University of Southern California - Marshall School of Business; National Bureau of Economic Research (NBER)

Lei Kong

University of Alabama - Department of Economics, Finance and Legal Studies

Xinyan Yan

University of Dayton

Multiple version iconThere are 2 versions of this paper

Date Written: April 19, 2021

Abstract

This paper proposes a network model of the economy in which conglomerate firms transmit idiosyncratic shocks from one industry to another. The strength of inter-industry connections is determined by the conglomerate's share of total industry sales and by the industry's share of the conglomerate's total sales. The empirical results show that industry growth rates comove more strongly within industry pairs that are more closely connected in the conglomerate network. These results hold after controlling for industry-pair and year fixed effects, input-output connections, reverse causality, and in tests that exploit exogenous cross-sectional industry shocks from import tariff changes. Finally, our model also provides a new cross-industry extension for the widely-used Herfindahl index of concentration.

Keywords: Conglomerates, Networks, Aggregate fluctuations, Industry comovement, Concentration

JEL Classification: L14, G32, E32

Suggested Citation

Ahern, Kenneth Robinson and Kong, Lei and Yan, Xinyan, The Conglomerate Network (April 19, 2021). Available at SSRN: https://ssrn.com/abstract=3829358 or http://dx.doi.org/10.2139/ssrn.3829358

Kenneth Robinson Ahern (Contact Author)

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA California 90089
United States

HOME PAGE: http://www-bcf.usc.edu/~kahern/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lei Kong

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States

Xinyan Yan

University of Dayton ( email )

300 College Park
Dayton, OH 45469
United States

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