Chaebol, Investment Opportunity Set and Corporate Debt and Dividend Policies of Korean Companies

Chaebol, Investment Opportunity Set and Corporate Debt and Dividend Policies of Korean Companies This paper examines explanations for the association between Korean Chaebol, which are giant conglomerates supported by various government initiatives, and corporate debt and dividend policies. Unlike in the US, the Korean corporate sector is dominated by the Chaebol which are characterized by concentrated family ownership, political affiliation and bank ownership. These institutional arrangements are likely to encourage more debt financing. In addition, the study also investigates whether firms with more growth options measured in terms of the investment opportunity set (IOS) have lower leverage and dividends. Results using observations from 411 Korean firms showed that for a fixed level of growth opportunities, Chaebol carry higher levels of debt. Results also show that growth options were negatively associated with leverage and dividends. No association, however, was found between Chaebol and dividends. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Chaebol, Investment Opportunity Set and Corporate Debt and Dividend Policies of Korean Companies

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1999 by Kluwer Academic Publishers
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1023/A:1008397808221
Publisher site
See Article on Publisher Site

Abstract

This paper examines explanations for the association between Korean Chaebol, which are giant conglomerates supported by various government initiatives, and corporate debt and dividend policies. Unlike in the US, the Korean corporate sector is dominated by the Chaebol which are characterized by concentrated family ownership, political affiliation and bank ownership. These institutional arrangements are likely to encourage more debt financing. In addition, the study also investigates whether firms with more growth options measured in terms of the investment opportunity set (IOS) have lower leverage and dividends. Results using observations from 411 Korean firms showed that for a fixed level of growth opportunities, Chaebol carry higher levels of debt. Results also show that growth options were negatively associated with leverage and dividends. No association, however, was found between Chaebol and dividends.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Sep 30, 2004

References

  • Investment Opportunities and the Structure of Executive Compensation
    Baber, W.R.; Janakiraman, S.N.; Kang, S.-H.

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