Intragroup Propping: Evidence from the Stock-Price Effects of Earnings Announcements by Korean Business Groups

Gil S. Bae, Youngsoon S. Cheon and Jun-Koo Kang

The Review of Financial Studies, 2008, vol. 21, issue 5, 2015-2060

Abstract: Using earnings announcement events made by firms belonging to Korean chaebols, we examine propping within a chaebol. Consistent with the market's ex ante valuation of intragroup propping, we find that the announcement of increased (decreased) earnings by a chaebol-affiliated firm has a positive (negative) effect on the market value of other nonannouncing affiliates. The sensitivity of the change in the market value of nonannouncing affiliates to abnormal returns for the announcing firms is higher if the cash flow right of the announcing firm's controlling shareholder is higher. The sensitivity is also higher if the announcing firm is larger, performs well, and has a higher debt guarantee ratio. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org., Oxford University Press.

Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (48)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhn055 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:21:y:2008:i:5:p:2015-2060

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().