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Economic shock, business group, and determinants of firm value and restructuring : Evidence from the Korean financial crisis

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  • Economic shock, business group, and determinants of firm value and restructuring
  • Baek, Jae-Seung
  • Asian Institute of Corporate Governance


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Title Economic shock, business group, and determinants of firm value and restructuring
Similar Titles
Sub Title

Evidence from the Korean financial crisis

Material Type Proceedings
Author(English)

Baek, Jae-Seung

Publisher

[Seoul, South Korea]:Asian Institute of Corporate Governance

Date 2001-10
Pages 52
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < General
Holding Research Gate

Abstract

During the 1997 Korean financial crisis, typical Korean firms lost substantial part of their market value. We show that firms that are financially weak and those that maintain close ties to the main bank experience a larger drop in the value of their equity. In contrast, firms with large equity ownership by unaffiliated investors and those with alternative means of external financing experience a smaller drop in share value. We also find that Korean firms experiencing the economic shock rely more heavily on the asset sales as their restructuring mode and downsize more frequently than do firms experiencing performance shock. High leverage or concentrated ownership by owner-managers of chaebol (business group) firms decreases the likelihood of downsizing, but increases the probability of expansion. We further demonstrate that downsizing (expansionary) actions have a positive (negative) effect on the value of chaebol firms. (The rest omitted)