Business Group Heterogeneity and Firm Outcomes: Evidence from Korean Chaebols

Working Paper SES no 531

39 Pages Posted: 11 May 2023 Last revised: 16 Oct 2024

See all articles by Romain Ducret

Romain Ducret

University of Fribourg (Switzerland) - Faculty of Management, Economics and Social Sciences

Dušan Isakov

University of Fribourg (Switzerland) - Faculty of Management, Economics and Social Sciences

Date Written: January 29, 2024

Abstract

This study examines how business group heterogeneity affects firm outcomes using data from Korean chaebols (2007-2019). We employ a three-level empirical strategy  considering: 1) market-level average effects, 2) effects across categories of business groups, and 3) group-specific effects capturing unobservable attributes. Our analysis reveals substantial variations in affiliation effects between business groups, often diverging from average market-level effects. We find that group resources significantly impact affiliate performance - investors assign higher valuations to firms affiliated with large, financially sound, and well-performing business groups. While performance effects are primarily market-driven, we document considerable heterogeneity in financial and investment policies across groups, likely influenced by unobservable characteristics such as controlling shareholders' preferences. Our findings highlight the importance of considering business group heterogeneity when analyzing affiliate performance.

Keywords: Business groups, performance, financing policies, investment, Korea

JEL Classification: G30, G32, G35, L22

Suggested Citation

Ducret, Romain and Isakov, Dušan, Business Group Heterogeneity and Firm Outcomes: Evidence from Korean Chaebols (January 29, 2024). Working Paper SES no 531, Available at SSRN: https://ssrn.com/abstract=4432008 or http://dx.doi.org/10.2139/ssrn.4432008

Romain Ducret (Contact Author)

University of Fribourg (Switzerland) - Faculty of Management, Economics and Social Sciences ( email )

Fribourg, CH 1700
Switzerland

HOME PAGE: http://www3.unifr.ch/cgf/en/

Dušan Isakov

University of Fribourg (Switzerland) - Faculty of Management, Economics and Social Sciences ( email )

Fribourg, CH 1700
Switzerland

HOME PAGE: http://www3.unifr.ch/cgf/en/

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