Corporate Political Ties and Firm Value: Comparative Analysis in the Korean Market

Chune Young Chung, Jung Hoon Byun and Jason Young
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Chune Young Chung: School of Business Administration, College of Business and Economics, Chung-Ang University, Seoul 06974, Korea
Jung Hoon Byun: School of Business Administration, College of Business and Economics, Chung-Ang University, Seoul 06974, Korea
Jason Young: College of Business, Washington State University, Pullman, WA 99164, USA

Sustainability, 2019, vol. 11, issue 2, 1-25

Abstract: Although prior studies have viewed corporate political ties as unethical, this study investigates whether changes in the political environment can significantly affect the net value of firms over time in emerging and transitioning economies. Analysis of a panel of South Korean listed firms in the Gyeongsang and Jeolla provinces from 1998 to 2013 reveals that political network ties to the regime currently in power provide significantly more positive benefits to politically connected firms than to non-connected firms. However, political network ties to the rival of the regime in power have significantly more negative effects on politically connected firms than on non-connected firms. More importantly, unexpected political regime changes strongly affect the shift from positive to negative effects on firm value over time, and political network ties continue to significantly and positively affect firm value over time during regime changes after political and economic liberalization in South Korea. These results line up with various robustness tests.

Keywords: business ethics; political connection; firm value; regionalism; contingency perspective (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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