Investment efficiency of firms outside the business group

Yunxiao Liu, Woochan Kim () and Taeyoon Sung

Journal of Corporate Finance, 2021, vol. 71, issue C

Abstract: Using Korean firms between 1987 and 2010, we show that non-group firms suffer more from investment inefficiency if they operate in industries where group firms belong to larger business groups. We also find that this effect exists mainly during a period characterized by a capital supply shortage and low cash flow pledgeability to investors. Further analyses indicate that the effect is attributable not to human capital constraints, but external financing constraints imposed by business group firms and that causality runs from business group strength to investment inefficiency of non-group firms.

Keywords: Business group; Internal capital market; Investment efficiency; Financial sector development; Investor protection; Capital allocation efficiency (search for similar items in EconPapers)
JEL-codes: G3 G31 G32 G34 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:71:y:2021:i:c:s0929119921002273

DOI: 10.1016/j.jcorpfin.2021.102105

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