TY - JOUR
T1 - Investment efficiency of firms outside the business group
AU - Liu, Yunxiao
AU - Kim, Woochan
AU - Sung, Taeyoon
N1 - Publisher Copyright:
© 2021
PY - 2021/12
Y1 - 2021/12
N2 - Using Korean firms between 1987 and 2010, we show that non-group firms suffer more from investment inefficiency if they operate in industries where group firms belong to larger business groups. We also find that this effect exists mainly during a period characterized by a capital supply shortage and low cash flow pledgeability to investors. Further analyses indicate that the effect is attributable not to human capital constraints, but external financing constraints imposed by business group firms and that causality runs from business group strength to investment inefficiency of non-group firms.
AB - Using Korean firms between 1987 and 2010, we show that non-group firms suffer more from investment inefficiency if they operate in industries where group firms belong to larger business groups. We also find that this effect exists mainly during a period characterized by a capital supply shortage and low cash flow pledgeability to investors. Further analyses indicate that the effect is attributable not to human capital constraints, but external financing constraints imposed by business group firms and that causality runs from business group strength to investment inefficiency of non-group firms.
KW - Business group
KW - Capital allocation efficiency
KW - Financial sector development
KW - Internal capital market
KW - Investment efficiency
KW - Investor protection
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U2 - 10.1016/j.jcorpfin.2021.102105
DO - 10.1016/j.jcorpfin.2021.102105
M3 - Article
AN - SCOPUS:85117588430
SN - 0929-1199
VL - 71
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
M1 - 102105
ER -