Internal capital markets, corporate investment, and the COVID-19 pandemic: Evidence from Korean business groups

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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 value.

Original languageEnglish
Article number102053
JournalInternational Review of Financial Analysis
Volume80
DOIs
StatePublished - Mar 2022

Keywords

  • COVID-19
  • Chaebol
  • Internal capital markets
  • Investment

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