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“Financial Systems and Institutions in the Third Millenium ” conference (Jerusalem), and the “Emerging Markets Finance ” conference (London Business School) for very helpful comments and suggestions. Several individuals assisted us with data collection, especially Chanhi Park with the Korean data, Liat Sack with the Israeli data, and Hideaki Miyajima with the pre-war Japanese data. William Simpson contributed his invaluable econometric expertise, and Eli Enoch, Kathleen Ryan, James Schorr and Zamir Sivan assisted in assembling the database. Khanna thanks the Division of Research at HBS for financial support. All errors remain our own. Business Groups and Risk Sharing around the World Researchers commonly assume that business groups, a ubiquitous organizational form in emerging markets, permit affiliated firms to share risk by smoothing income flows and by reallocating money from one affiliate to another in times of distress. This view has received support in the literature on Japanese keiretsu. To examine the generality of these findings worldwide, we amass a new data set on business groups in 15 emerging markets, and couple this with historical and modern data from Japan. Our results, using multiple estimation techniques, corroborate the existing evidence on risk sharing within the Japanese keiretsu. In addition, in