Korean Chaebols Research Articles

Business group heterogeneity and firm outcomes: Evidence from Korean chaebols

Business group heterogeneity and firm outcomes: Evidence from Korean chaebols

The Influence of Neo-Confucian Theory on Southern Korean Economic Development: An In-depth Analysis of the Relationship between Neo-Confucian Culture and Southern Korean Economy

This article assesses the influence of neo-Confucian theory in fuelling the South Korean economic development. Through an emphasis on the East Asian capitalist model of development encapsulating the interweaving of Confucian ethics and the (universally) revered Western capitalist tenets, this study directs attention to the role of cultural values in economic development. When juxtaposed with the Western model of development, the distinctiveness of the East Asian model of development resides in the fact that it interweaves the central tenets of Confucian ethics to the Western capitalist model of development, forming the basis of the Neo-Confucian theory. This study positions the interconnection between cultural values and economic growth within the divergence of academic scholarship, namely the ‘Confucian as an impediment’ and ‘Confucian as a stimulus’ strands of scholarship to equip with a comprehensive understanding of whether culture can function as an explanatory variable for South Korean economic development. The example of Korean chaebols enables readers to equip the knowledge that while culture performs a constitutive role in the South Korean economic model of development cannot serve as the sole factor for propelling the nation’s economic expansion. This study envisions bridging the widening gap in the dominant scholarship on the role of Confucianism in South Korean economic development by contending that Confucian ethics as the hegemonic ideology creates a favourable climate for the South Korean economic model to flourish.

The South Korean chaebol and myths of green growth: Coloniality and Argentinian lithium production

Observers have celebrated the drive by multinational corporations to develop lithium-ion batteries as a positive step in mitigating climate change. Much of this hype, however, has resulted from corporate leaders propagating green growth narratives that trumpet the capacity of electric cars to initiate an energy transition. Against this backdrop, the paper describes and analyzes significant contradictions of green growth. The South Korean (hereafter, Korea) ‘chaebol’ (enormous, family-owned conglomerates) have deployed green growth myths to build global value chains that transform lithium into batteries that can electrify transportation. I will show how these growth strategies simultaneously produce domestic inequality in Korea and colonial inequities in Argentina, where a large proportion of the world's reserves of lithium lie. Since the 1990s, the chaebol have developed new strategies of accumulation based on a shift toward building global value chains and away from domestic economic growth and expanding employment. The growing electric vehicle industry represents a continuation of these corporate strategies, directing investments to flow abroad in ways that contract domestic employment. These technological innovations require lithium, prompting the chaebols to move decisively to establish control over a significant share of lithium production in Argentina. In seeking to create new pools of value within the much-hyped green transition, these activities have inflicted significant environmental degradation. Moreover, the coloniality of corporate relations with local labor dramatizes how the green transition promised by electric vehicles unevenly distributes the risks and benefits between those parts of the world producing green energy and the industrialized countries consuming it.

Innovation spillovers within business groups: Evidence from Korean chaebols

This study examines innovation spillovers within business groups, focusing on Korean chaebols. We find that an affiliated firm's innovation is affected positively by both within- and outside-group innovation spillover pools. Specifically, the impact of the within-group pool is more pronounced than that of the outside-group pool. We further find that within-group spillovers are stronger for affiliates with closer internal business relationships and for those whose controlling shareholders have higher group- or firm-level equity stakes. Finally, we show that greater within-group innovation spillovers lead to higher group-level innovative performance. Overall, our study suggests a pivotal role of business groups in promoting corporate innovation via effective innovation spillovers. (JEL G15, G30, O32, O33).

The Power of Political Connections: Evidence from Korean Chaebols and Government Procurement

ABSTRACT This paper investigates the impact of political connections on the performance of Korean chaebol companies. We use two indicators to measure the ability and diversity of political connections and find that chaebol companies are more likely to establish political connections compared to non-chaebol firms, which gives them an advantageous position in government procurement bidding. Significantly, our findings indicate that political connections correlate positively with the monetary value of government contracts secured by chaebols, underscoring the direct economic benefits of these connections. Overall, our study sheds light on the motivation for the political networks of chaebol firms and contributes to a better understanding of the direct benefits of political connections.

Do other firms’ stock price crashes affect corporate investment decisions within the business group: Evidence from Korean Chaebols

This research investigates the nexus between stock price crashes and subsequent investment behavior within business conglomerates, specifically Korean Chaebols. Utilizing an extensive dataset of affiliated firms from 2005 to 2020, we find that stock price crashes in one firm negatively influence the investment activities of its affiliated counterparts within the same Chaebol. The evidence elucidates spillover effects and heightened risk aversion among these firms, particularly in volatile market conditions. These findings underscore the imperative for vigilant risk management and proactive investment strategies to counteract the cascading impact of stock price crashes within Chaebol ecosystems.

Controlling Shareholders' Value and Corporate Tax Avoidance*

AbstractThis paper investigates whether and how controlling shareholders' value (i.e., the concentration of controlling shareholders' wealth within a business group) affects corporate tax planning using Korean chaebols. We find that firms with high controlling shareholders' value engage in a lower level of tax avoidance than other affiliates in the business group. We also find that controlling shareholders' concern about the costs of tax avoidance (i.e., regulatory penalties and reputational damages) are potential mechanisms that prevent firms with high controlling shareholders' value from aggressive tax planning. Lastly, we provide the value implication of tax avoidance for firms with high controlling shareholders' value.

The Influence of Chaebol Solidarity on School Violence in South Korea: Insights from The Glory

School violence in South Korea is a pressing issue, surpassing the severity seen in many other countries. In an effort to address this problem, South Korea has turned to various movies and dramas to raise awareness and advocate for the prohibition of school violence. The Glory, a recent popular Korean series on Netflix, delves into the harrowing tale of a victim enduring school violence and seeking retribution. This research aims to dissect how The Glory portrays and sheds light on the issue of school violence, providing a clearer perspective on the current situation of school violence in Korea. Drawing upon cinematic and television dramas, as well as existing literature, this study seeks to gather information and ultimately provide insights into the problem at hand. Through a comprehensive examination, it becomes evident that in Korea, the entrenchment of plutocracy plays a pivotal role in the prevalence of school violence. Korea's economy heavily relies on conglomerate companies, and the nexus between Korean chaebol and the government is undeniable, wielding immeasurable power. Consequently, the influence of these conglomerates extends to the realm of school violence. This research contributes to a deeper understanding of the relationship between plutocracy and school violence, offering valuable insights for fellow researchers studying this critical issue.

Gender inequalities in Korean family business: contradictions between show and tell

PurposeThis paper explores how gender-related issues are communicated in Korean family-run conglomerates (chaebols) and the roles of women within these businesses. It also addresses to what extent the communication of chaebols about female employment and career development reflects the perception of gender representation in these organisations.Design/methodology/approachBy paying attention to gendered discourse in Korean chaebols, this paper examines what is said and written about gender issues in glottographic statements (texts) and non-glottographic statements (charts and other visuals) of annual reports (ARs) published by five chaebols since 2010. The paper uses a Foucauldian framework to develop the archive of statements made within these ARs.FindingsAlthough there is an increase in female-employee ratios, ARs show that number of women at the board or senior management level continue to be small. ARs tend to provide numbers related to female employment and retention in their non-glottographic statements, yet these numbers occasionally differ from and frequently are not explained by glottographic statements. The strategies used by chaebols to improve career prospects for their female staff are only vaguely described and rarely evaluated.Originality/valueThis paper looks beyond the existing discourse analysis on “talk and text” by also investigating claims made through graphic and linear/pictorial elements and their interplay with text. This approach opens new understandings of how gendered discourses are constructed and how they (unintentionally) fail to resolve issues and perceptions related to female employment and career development in Korea.

재벌 총수의 수감 및 사면경험이 기업의 탄소배출량에 미치는 영향: 재벌기업을 중심으로

This study investigates the effect of the imprisonment and clemency experience of Chaebol heads on the amount of firm’s carbon emissions. Using data of Korean Chaebol firms between 2015 and 2019, we find that firms with the imprisonment and clemency experience of Chaebol heads are negatively associated with carbon emissions and abnormal carbon emissions compared with firms without those experiences. The results imply that firms with the imprisonment and clemency experience of Chaebol heads care aboutBRthe amount of carbon emission to fulfill their environmental responsibilities although the amount of carbon emissions is not the public interest. Moreover, we find that firm value is decreased when firms with the imprisonment and clemency experience of Chaebol heads reduce the amount of carbon emissions. This finding suggests that market perceive firm’s carbon emission reduction as an opportunistic behavior. Taken together, this study contributes to carbon emissions literature by providing evidence of individuallevel effect on the amount of firm’s carbon emissions.

Economic policy uncertainty and corporate investment: An empirical comparison of Korean chaebol and non-chaebol firms

Our paper investigates the effect of economic policy uncertainty on investment by chaebol and non-chaebol firms in Korea. We find that while both types of firms reduce investment during high-policy-uncertainty periods, chaebol firms do so more aggressively than non-chaebols. The negative effect of uncertainty on investment is exacerbated in chaebol firms that are financially constrained, face a higher debt cost, or operate in industries more dependent on external finance. Such impact depends on types of policy uncertainties, in which chaebol firms respond more strongly to uncertainties related to monetary and fiscal policies but not to trade and foreign exchange ones.

Lost in Aestheticization: Bong Joon-Ho's Parasite

Winning more than 300 awards and overachieving at the box office worldwide, Parasite remains a perfect marriage of arthouse and mainstream, social commentary and entertainment. However, the rapturous reception of the film belies the odd paucity of critical conversation, eclipsed by an explosion of "opinions." This article examines the way Parasite, by offering unlimited pleasures of interpretation of its elaborate cinematic details, leaves the theme of social disparity unchallenged: a process that would be best illuminated by Walter Benjamin's phrase, "the aestheticization of politics." The first part borrows from David Harvey and Bruno Latour and examines the film's spatialization of social inequality within two opposite dwellings. The second part analyzes Parasite's merging of smell and poverty, using Jacques Ranciere's term, "the distribution of the sensible." The last part delves into the things abundant in Parasite, how the exotic Korean objects designed to supplement action and characterization overpower the film and thus erase sociopolitical potentialities. The fact that Parasite was financed by a South Korean chaebol, which ironically created the film's artistic aura, shows that contemporary filmmaking cannot break free from neoliberalism but has become a cultural "parasite."

Internal Capital Markets and R&D Investment: Evidence from Korean Chaebols

ABSTRACT This study examines how internal capital markets (ICMs) within business groups affect the financing of research and development (R&D) investments, focusing on Korean chaebols. We find that, on average, chaebol-affiliated firms exhibit lower R&D investment – cash flow sensitivity than standalone firms do. We also find that an affiliated firm’s R&D expenditure is significantly positively associated with the net amount of equity capital received from other affiliates but not significantly related to its own cash flow. These findings indicate that ICMs effectively mitigate affiliated firms’ R&D financing constraints. We further find that this financing constraint mitigation is more pronounced during financial crises and for high-tech firms. Finally, we find that, for chaebols, greater ICM effectiveness leads to better innovative performance. Overall, our study highlights the importance of ICMs for promoting corporate innovation via the reduction of R&D financing constraints.

Internal labor markets and corporate innovation: Evidence from Korean chaebols

This study investigates the effect of internal labor markets (ILMs) on corporate innovation, focusing on Korean chaebols. Prior to examining the effect of ILMs, we confirm their efficiency, finding that chaebol firms with lower (higher) growth opportunity exhibit higher (lower) subsequent labor outflows. Further, ILM efficiency is more pronounced for firms within a more diversified chaebol, those whose controlling shareholder has lower equity stakes, and during a financial crisis period. We then investigate the effect of ILMs on innovation. We find that ILM efficiency leads affiliated firms to show greater innovative performance. Moreover, this positive influence is more pronounced for firms that receive internal capital. Overall, our study suggests the importance of ILMs in promoting corporate innovation among group firms. (JEL G30, J40, L22, O33).

Business Group Heterogeneity and Firm Outcomes: Evidence from Korean Chaebols

Business Group Heterogeneity and Firm Outcomes: Evidence from Korean Chaebols

A Progressive Turn on Corporate Ownership in the Second Republic of Korea

This study traces the evolution of corporate governance and state regulation in the context of Korean chaebols during and after the state led industrialisation of the 1960s. A description of changes in corporate ownership and control structures in response to progressive measures towards corruption and wealth concentration by the state reveals the establishment of new corporate and political networks which facilitated the persistence and growth of surviving chaebols. This study also illustrates the trajectory of family control of chaebols consequent to strong inheritance regulation and financial liberalization.

Internal Dynamics of Dividend Policy in East-Asia: A Comparative Study of Japan and South Korea

Japanese and Korean financial systems are distinct from those in the western economies. Considering this, we examine how the dividend policy of the firms in two of the largest economies of East Asia is determined by the internal attributes of firms. Firm-level data from 1,773 Japanese and 1,035 Korean firms were evaluated using panel data techniques, and some interesting similarities and differences in the dividend policies of both countries were unearthed. For example, in both countries, larger firms pay higher dividends, whereas those firms with volatile earnings pay low dividends. It was also determined that Korean firms pay more dividends when their profitability surges. On the other hand, cash dividends in Japanese firms decline when there is an increase in their profitability level. Overall, the dividend policy of Korean firms resembles more to those in Anglo-Saxon countries, while the dividend policy of Japanese firms bears little resemblance to other established financial systems. This study is the first to compare and contrast the internal dynamics of dividend policy for both the Japanese Keiretsus and Korean Chaebols while evaluating a huge universe of firms from both countries. Transnational studies are important to draw parallels and differences. The findings of this study offer important implications for various stakeholders, including managers, investors, and policymakers. Also, the results pave the way for a theoretically enriched understanding of dividend policy by comparing and contrasting diverse financial systems.

The value of official business group affiliation: Evidence from a change in Korean chaebol designation policy

The Korean government doubled the total assets threshold for its large business group (chaebol) designation policy in 2016. Exploiting this policy change, I examine the value implications of a firm's chaebol affiliation. I show that firms affiliated with business groups that had become non-chaebols because of the policy change experienced substantial decreases in value and investment. Further analysis suggests that these results are partly driven by corporate governance features and increased financial frictions. Short-run stock market reactions to announcements regarding the policy change did not predict its long-term value implications.

Relationship between Related Party Transactions and the Social Contribution Activities of South Korean Chaebol Companies

Corporate social responsibility (CSR) encompasses activities through which a firm ultimately achieves sustainable management by improving the society and environment. Contrary to the general perception that CSR activities can improve only the enterprise value (EV), they can also be strategically deployed based on agency problems (situational factors). Specifically, by focusing on the nature of related party transactions that exhibit high tendencies to introduce agency problems, this study analyzes whether South Korean firms that engage in such transactions perform CSR activities more actively than those that do not. The empirical analysis reveals that firms that engage in related party transactions exhibit increased CSR activity scores, indicating that managers are more likely to deploy CSR activities as a tool for managing their image and concealing or embellishing illicit corporate transactions. Hence, CSR activities undertaken at the expense of shareholders may be opportunistically exploited as a tool for positively embellishing a firm’s image. However, it is observed that chaebol companies do not strategically exploit CSR activities, despite being engaged in related party transactions. Thus, chaebol companies that are registered with a large business group and under the supervision system of the government are unlikely to opportunistically exploit CSR activities.

Owners Of Korean Conglomerates And Corporate Investment

We investigate whether Korean chaebol owner’s personal features affect corporate investment or not, for they have a unique governance system controlled by one powerful owner. With this governance, the impact of personal characteristics on major corporate decisions can be tested more clearly. We used the aggregate financial statement to measure chaebol’s financial performances in a more reasonable way as well. Our study shows a few noticeable results. Aggregate financial performances of chaebols are different from those of individual companies. Owner’s personal features affect corporate decision makings in Korean chaebols. Especially, chaebols under succession process invest less than others, preferring more conservative approaches for succession.