Family Business Group Expansion through IPOs: The Role of Internal Capital Markets in Financing Growth while Preserving Control

Using data from 44 countries, we document a new channel through which a family business group's internal capital market supports its members. We find that groups use internal capital to incubate difficult-to-finance projects, making it feasible for them to rapidly scale up, thus facilitating their IPO market access. This IPO support role is particularly valuable when groups find capital raising through SEOs less attractive due to control-retention concerns, and in capital markets with high new-firm financing barriers. Unlike carve-outs employed as a corporate restructuring strategy, group-affiliated IPOs primarily appear to serve a group's expansion goals, rather than its liquidation needs.