Corporate governance and business groups: evidence from Korea after East Asian financial crisis

Abstract

Essay 1. MMSB 20074269 이상원. Lee, Sangwon. Audit Committees, Corporate Governance, and Shareholder Wealth: Evidence from Korea. 감사위원회와 기업지배구조가 주주의 부에 미치는 영향에 관한 연구. Department of Management Science. 2012. 00 p. Advisor Prof. Seung Hun Han. Text in English.

Abstract This paper examines the effect of audit committee appointments on shareholder wealth in Korea after the Asian financial crisis. We show that while stock prices generally increase with audit committee appointment, chaebol (business group) affiliates and firms switching audit committee membership are associated with significantly lower stock returns. We suggest that this may be due to the management’s opportunistic behavior to maximize his/her self-interest. However, the independence and financial literacy of the audit committee members appear to help discourage this opportunistic behavior. Our result also confirms that the characteristics of the audit committee complement or substitute the existing corporate governance system. In conclusion, the regulatory governance mechanism established in Korea following the Asian financial crisis seems to be partly effective.

Essay 2. MMSB 20074269 이상원. Lee, Sangwon. Internal capital markets, corporate investment, and corporate governance: Evidence from Korean Chaebols. 내부자본시장과 기업지배구조가 기업투자에 미치는 영향에 관한 연구: 한국 재벌기업의 사례를 중심으로. Department of Management Science. 2012. 38 p. Advisor Prof. Seung Hun Han. Text in English.

Abstract Using samples from the corporate governance reform period after the East Asian financial crisis in 1997, this paper investigates the role of internal capital markets of Korean business groups (chaebols) on their affiliated firms’ capital investments. In contrast to the earlier findings of Lee et al. (2009), this paper finds that chaebol affiliated firms tend to spend more on capital investments than comparable non-chaebol firms. Ownership concentration and strength of corporate boards seem to affect the utilization of the internal capital ma...