Comparative corporate governance research has recently emphasized the relationship between formal shareholder protection and a number of firm and country-level outcomes, such as breadth and depth of national stock markets and minority expropriation. Stronger formal protection of minority shareholders is argued to lead to lesser opportunities for management or controlling shareholders to expropriate minority investors, and therefore make external funds, both domestic and international, more readily available for financing firms and ownership more dispersed. European countries display a substantial variety on these dimensions. The UK, on the one hand, has comparatively strict formal minority protection, broad and deep stock markets and dispersed ownership, while most continental European countries, on the other hand, generally have less strict formal minority protection, smaller stock markets and more concentrated ownership. There are, however, notable exceptions to this pattern. Swedish corporate governance, for example, paradoxically combines concentrated ownership, widespread use of instruments to separate cash-flow from voting rights, and moderate formal minority protection with a broad and deep stock market, large foreign ownership and comparatively limited minority expropriation. In this paper we propose that Swedish controlling owners’ widespread propensity for forming business groups combining many, often industrially unrelated, formally independent firms help resolve this puzzle. Controlling shareholders with a reputation for acting in the interest of minority shareholders, as most Swedish controlling shareholders arguably have, can capitalize on this reputation by a lower cost of capital; a benefit which is likely to be transferable across firms. However, while forming a business group allows controlling shareholder to capitalize on their reputation, the cost of acting in ways harming minority shareholders is also raised, as a devalued reputation affect all firms in the business group. We present empirical evidence that consistently show that forced delistings in the context of minority protests lead to negative abnormal returns in firms unaffected by the harmful acts, but in which the controlling shareholder orchestrating the delisting holds a significant stake. Business groups exist in different forms and with different frequencies in most European countries and the paper thus sheds light on a governance mechanisms that potentially is of major importance for understanding corporate governance in a number of European countries characterized by concentrated ownership and, in law, relatively unprotected minority shareholders.