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
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: Suggested Citation