The associated network embedded decision-making authority allocation and risk-taking of enterprise groups

Area of Science:

• Corporate Finance
• Organizational Structure
• Risk Management

Background:

• Enterprise groups often face complex risk-taking behaviors.
• Internal allocation of decision-making authority significantly influences corporate strategy and risk.
• Understanding these dynamics is crucial for mitigating financial and economic risks.

Purpose of the Study:

• To investigate the impact of centralized decision-making on enterprise group risk-taking.
• To analyze the mediating role of the internal capital market in this relationship.
• To explore the moderating effects of internal director networks and institutional investor networks.

Main Methods:

• Analysis of A-share listed parent-subsidiary companies (2010-2022).
• Development of a moderated mediation model with an associated network.
• Examination of internal capital market mechanisms, including investment diversification and allocation efficiency.

Main Results:

• Centralized decision-making structures correlate with a reduced overall risk profile.
• Internal capital markets mitigate risk by suppressing diversified investments and enhancing capital allocation efficiency.
• Internal director networks enhance internal capital market efficiency, while institutional investor networks reinforce risk reduction.

Conclusions:

• Centralized authority and efficient internal capital markets are key to reducing enterprise risk.
• Network structures play a significant role in modulating the effectiveness of internal capital markets.
• Findings offer strategies for preventing and mitigating significant economic and financial risks.