Abstract
AbstractWe examine how business group affiliation affects a firm's labor investment decisions. Using data from 2002 to 2014, we find that Korean business group‐ (chaebol‐) affiliated firms make more efficient labor investments than nonaffiliated firms. The positive relation between chaebol‐affiliated firms and labor investment efficiency is attributed to the mitigation of underinvestment in labor. Moreover, chaebol affiliates have higher labor productivity than stand‐alone firms. We further show that both labor sharing among affiliated firms and their easy access to external financing lead to more efficient labor investments for chaebol firms, compared to stand‐alone firms.
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