Contents

Closing inefficient affiliates: Evidence from Korean conglomerates

Min, Heechul / Sohn, Wook

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Abstract

In the wake of the financial crisis, the Korean government and creditor banks announced a 'blacklist' of 55 firms to be forced to exit the market. This article examines the effects that the closed affiliated firms had on stock market values of the Korean business groups (chaebols). We find that the announcement had an immediately negative effect on the remaining affiliates. The announcement's adverse effect became worse as firms had more affiliates in the 'blacklist' and had more investment from them, after controlling for various firm characteristics. These results suggest that the corresponding chaebols had financially weak firms besides those in the 'blacklist', or that the affiliates could not recover their investment when the blacklisted firms were closed.

Issue Date
2008
Publisher
Chapman & Hall
Keywords
banking; financial crisis; financial system; investment; stock market; Asia; Eurasia; Far East; Korea
Citation
APPLIED FINANCIAL ECONOMICS, v.18, no.16, pp.1351 - 1361, 2008
DOI
10.1080/09603100701663254
Journal Title
APPLIED FINANCIAL ECONOMICS
Start Page
1351
End Page
1361
ISSN
0960-3107
Language
English
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