Internal Capital Markets, Corporate Investment, and the COVID-19 Pandemic: Evidence from Korean Business Groups

33 Pages Posted: 15 Jul 2021 Last revised: 19 Aug 2021

Date Written: August 2021

Abstract

This paper examines whether the investment of Korean business group ("chaebol") affiliated firms behaved differently from that of non-chaebol firms in response to the COVID-19 outbreak. I show that chaebol firms cut back investment to a lesser degree than similar non-chaebol firms. Chaebol firms with higher-than-industry-median market-to-book ratios invested more and experienced less decline in their stock prices, while I do not find such relationships for non-chaebol firms. This paper provides evidence that chaebol internal capital markets helped mitigate the negative effects of the pandemic on firm investment and values.

Keywords: Chaebol; Investment; Internal Capital Markets; COVID-19

JEL Classification: G30; G32; G39

Suggested Citation

Lee, Sangwon, Internal Capital Markets, Corporate Investment, and the COVID-19 Pandemic: Evidence from Korean Business Groups (August 2021). Available at SSRN: https://ssrn.com/abstract=3884630 or http://dx.doi.org/10.2139/ssrn.3884630

Sangwon Lee (Contact Author)

University of Seoul ( email )

Seoul
Korea, Republic of (South Korea)

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