Value discount of business groups surrounding the asian financial crisis: Evidence from korean chaebols

• Main Authors: CHANG, James Jinho, CHO, Young Jun, KANG, Won, SHIN, Hyun-Han
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2007
• Subjects: Asian financial crisis; business group; Chaebol; Diversification; firm value; Asian Studies; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/soa_research/1573; https://ink.library.smu.edu.sg/context/soa_research/article/2600/viewcontent/HJeco0480201590__1_.pdf
• Institution: Singapore Management University

We examine the effect of business group membership on firm value in each pre-and postcrisis Korea. Consistent with prior studies, results show that group affiliated chaebol firms suffer value discount relative to non-chaebol firms in the precrisis period. However, we also find that chaebol firms experience an improvement in firm value relative to non-chaebol firms after the financial crisis. These findings imply that the value discount of business groups reported in prior studies is not an inevitable consequence of diversification, but can be alleviated or overcome by structural reforms in business practices or economic conditions.