Abstract
Korean business groups, chaebol, reduced operational risk in the aftermath of the 1997 Asian financial crisis by reducing (increasing) investment in risky (safe) member firms. Risk reduction was accompanied by capital reallocation from risky member firms to safe member firms through equity investments. Consequently, chaebol reduced investment to a lesser extent than otherwise similar stand-alone rms did while reducing risk to a greater extent. Risk reduction was stronger among chaebol with greater dependence on external financing and with greater variability in risk across member firms. Our results suggest that internal capital markets along with within-group risk variability enabled chaebol to effectively reduce group-level operational risk in response to the increased cost of external financing.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
