Spillover Effects within Business Groups: The Case of Korean Chaebols

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We examine the spillover effects that occur within Korean business groups (i.e., chaebols) by focusing on the market reactions of event firms to announcements of credit rating changes. We find that there are positive spillovers (caused by positive market reactions) and negative spillovers (caused by negative market reactions) that are driven by the market reactions of event firms. Our analyses indicate that negative spillovers are more dominant than positive spillovers. Moreover, a spillover that is driven by a leading firm within a business group has stronger effects on other firms in the group than a spillover that is driven by a nonleading firm. This suggests that the market evaluation of a business group is conducted more on the basis of a leading firm than a nonleading firm within a group. Finally, we show that the spillover effects that are analyzed in our study are more noticeable when the business relationship between an event firmand other affiliated firms is closer.
Publisher
INFORMS
Issue Date
2018-03
Language
English
Article Type
Article
Keywords

CREDIT DEFAULT SWAP; BOND RATING CHANGES; CORPORATE GOVERNANCE; FINANCIAL CRISIS; STOCK-PRICES; FIRM VALUE; CONTAGION; ANNOUNCEMENTS; MARKETS; RISK

Citation

MANAGEMENT SCIENCE, v.64, no.3, pp.1396 - 1412

ISSN
0025-1909
DOI
10.1287/mnsc.2016.2596
URI
http://hdl.handle.net/10203/241457
Appears in Collection
MT-Journal Papers(저널논문)
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