Economic performance of group-affiliated companies in Korea: Intragroup resource sharing and internal business transactions

Abstract

This study examined the economic performance of the firms associated with Korean business groups by explicitly addressing groupwide resource sharing and internal business transactions. The results show that group-affiliated firms benefit from group membership through sharing intangible and financial resources with other member firms. Further, this study shows that various forms of internal business transactions, such as debt guarantee, equity investment, and internal trade, are extensively used for the purpose of cross-subsidization.