Abstract
This paper analyzes the investment behavior of the Korean corporate sector before and after the 1997 financial crisis. Using firm-level data, we find that after controlling for investment profitability and cash flows, Korean conglomerates ('chaebol')-affiliated firms, particularly ones with low-managerial ownership, made significantly higher investments than non-chaebol firms before the crisis. In contrast, this difference in investment volume between chaebol and non-chaebol firms is no longer existent in the period following the crisis. We find the sharp reduction in investment by chaebols in the post-crisis period can be attributed mainly to the need to moderate their debt burden. It is not clear, however, whether these changes indicate an improvement in investment efficiency.
Original language | English |
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Pages (from-to) | 347-373 |
Number of pages | 27 |
Journal | Japan and the World Economy |
Volume | 19 |
Issue number | 3 |
DOIs | |
Publication status | Published - 2007 Aug |
Keywords
- Chaebol
- Corporate investment
- Debt/asset ratio
- Financial crisis
- Korean conglomerates
ASJC Scopus subject areas
- Finance
- Economics and Econometrics
- Political Science and International Relations