This study investigates whether business groups can harm the capital allocation efficiency of non-business group firms. From a sample of Korean firms (1987 to 2010), we compute an annual index of the collective strength and dominance of large business groups (LBG) per industry.
We find that this index is negatively associated with the industry-level capital allocation efficiency of non-LBG firms during a period characterized by underdeveloped financial markets and weak investor protection. The association is stronger in industries that may lack collateral or internal equity capital. Results are robust to different measures of the index and investment opportunity.
This study examines the effect of outside director tenure length on firms’ market valuation and the voting behavior of outside directors. We make use...
We examine whether common business group affiliation affects media reporting on firms and whether firms experience any real effects as a result. We find...