Agency problems and performance of Korean companies during the Asian financial crisis: Chaebol vs. non-chaebol firms

Abstract

Agency problems can become more serious during an economy-wide financial crisis and they can have different roles depending on the corporate governance structure of a company. This paper examines whether agency problems explain the performance of Korean companies during the Asian financial crisis and whether agency problems explain the performance differently for chaebol vs. non-chaebol firms. Korean business groups, chaebols, are known to have weaker corporate governance structures than non-chaebol firms. The results show that the performance during the crisis is somewhat closely related to agency problems. In addition, the paper presents some evidences that the role of agency problems depends on corporate governance structures. © 2003 Elsevier Science B.V. All rights reserved.