Intra-Business Group Transactions for Inducing Relationships between Network and Performance: Can the Network Be Optimized?

Abstract

This paper analyzes the relation between network linkage and firm performance through the intra-business group related-party transactions, and also explores whether the network linkage could be optimized. It is listed on the Taiwan Stock Exchange over 2006-2008 by using financial information for business groups. For whole samples, we find a U-shaped relation between ROA and related-party purchases network linkage, and there is an inverted-U-shaped association between related-party receivable-payable network linkages and debt ratio. We also find the sales expenses ratio is positively correlated with the number of related-party buyers, but negatively correlated with the related-party sales ratio. Moreover, for high related-party sales and high related-party purchases group, it demonstrates an inverted-U-shaped association between related-party sales and ROA, and the related-party receivable-payable gap ratio is negatively correlated with debt ratio. While for low related-party sales and low related-party purchases group, related-party purchases network linkage and ROA display a U-shaped characteristic, and there is a U-shaped association between total receivable-payable gap ratio and debt ratio.