Changes in chaebol firms’ overinvestment after the Asian financial crisis: a long-term perspective

Jaimin Goh, Wonwook Choi and Jungeun Cho

Asia-Pacific Journal of Accounting & Economics, 2016, vol. 23, issue 1, 75-111

Abstract: This paper examines chaebol firms’ overinvestment practices before and after a financial crisis in Korea. In comparison to non-chaebol firms, chaebol firms significantly reduced overinvestment after the Asian financial crisis. Also, chaebol firms were less inclined to engage in earnings management for overinvestment after the financial crisis. The results suggest that governance and financial reforms focusing on chaebol firms and emphasizing long-term firm value after the crisis discouraged chaebol firms’ overinvestment practices, bringing about a sharp rebound in their business performance.

Date: 2016
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DOI: 10.1080/16081625.2014.983632

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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