Internal capital markets, corporate investment, and the COVID-19 pandemic: Evidence from Korean business groups

Sangwon Lee

International Review of Financial Analysis, 2022, vol. 80, issue C

Abstract: This paper examines whether the investment of Korean business group (“chaebol”) affiliated firms behaved differently from that of non-chaebol firms in response to the COVID-19 outbreak. I show that chaebol firms cut back investment to a lesser degree than similar non-chaebol firms. Chaebol firms with higher-than-industry-median market-to-book ratios invested more and experienced less decline in their stock prices, while I do not find such relationships for non-chaebol firms. This paper provides evidence that chaebol internal capital markets helped mitigate the negative effects of the pandemic on firm investment and value.

Keywords: Chaebol; Investment; Internal capital markets; COVID-19 (search for similar items in EconPapers)
JEL-codes: G30 G32 G39 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:80:y:2022:i:c:s1057521922000291

DOI: 10.1016/j.irfa.2022.102053

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