Examining Political Connections to Study Institutional Change: Evidence from Two Unexpected Election Outcomes in South Korea

28 Pages Posted: 3 Apr 2019

See all articles by Kai Jäger

Kai Jäger

King's College London - Department of Political Economy

Seungjun Kim

University of Maryland

Multiple version iconThere are 2 versions of this paper

Date Written: April 2019

Abstract

We argue that the analysis of multiple political connections in an event study framework can improve the study of institutional change. Based on a unique data set of multiple political relationships of 4,936 South Korean board of director members, we show that the large business conglomerates, the chaebol, did not benefit from the unexpected conservative election victories in the 2012 South Korean parliamentary and presidential elections. Personal connections to the presidential candidates and to the opposition party were relevant for the stock returns of small firms. Our findings suggest that Korea's political economy has evolved into a hybrid regime in which the political power of large multinational corporations is limited, but political connections still matter for smaller firms. The corruption scandal that led to the impeachment of President Park in 2017 and the long‐term development of market capitalisation appear to be congruent with the results of our study.

Keywords: Chaebol, corruption, event study methodology, institutional change, networks, political connections, political economy, rent‐seeking, South Korea

Suggested Citation

Jäger, Kai and Kim, Seungjun, Examining Political Connections to Study Institutional Change: Evidence from Two Unexpected Election Outcomes in South Korea (April 2019). The World Economy, Vol. 42, Issue 4, pp. 1152-1179, 2019, Available at SSRN: https://ssrn.com/abstract=3365207 or http://dx.doi.org/10.1111/twec.12755

Kai Jäger (Contact Author)

King's College London - Department of Political Economy ( email )

Strand Building
London
United Kingdom

Seungjun Kim

University of Maryland

College Park, MD
United States

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