Investors' perception of business group membership during an economic crisis: Evidence from the COVID-19 pandemic
Romain Ducret ()
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Romain Ducret: Faculty of Economics and Social Sciences, Postal: Boulevard de Pérolles 90, 1700 Fribourg, http://www.unifr.ch/ses/
No 524, FSES Working Papers from Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland
This paper examines how investors perceive business group membership in Korea during the COVID-19 pandemic. Stock price performance analysis reveals evidence of a time-varying and heterogeneous value of affiliation: investors discount business group affiliation during a market collapse, but are willing to pay a premium for affiliation during market recovery. Overall, this pattern is more pronounced for financially weak affiliates and large business groups. The results further show that business group membership alleviates investors' concerns regarding financial flexibility, highlighting the role of internal capital markets as a substitute for external finance.
Keywords: Business groups; financial crisis; COVID-19; internal capital market; Korea (search for similar items in EconPapers)
JEL-codes: G01 G14 G38 L20 (search for similar items in EconPapers)
Pages: 52 pages
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