Investors’ Perception of Business Group Membership during An Economic Crisis: Evidence from the COVID-19 Pandemic

47 Pages Posted: 29 Jul 2021 Last revised: 5 Apr 2023

See all articles by Romain Ducret

Romain Ducret

University of Fribourg (Switzerland) - Faculty of Management, Economics and Social Sciences

Date Written: October 5, 2022

Abstract

This study exploits the economic shock triggered by the COVID-19 outbreak to examine the valuation of business group membership and internal capital markets. Based on Korean data, the empirical results reveal that value of affiliation switched from a discount to a premium as the pandemic unfolded and economic uncertainty decreased. Financial and governance risks appear as the main drivers of the discount observed during the first months of the pandemic. The analysis also shows that investors perceive group internal capital markets as a valuable source of financing in case of revenue drop.

Keywords: Business groups, financial crisis, COVID-19, internal capital market, Korea

JEL Classification: G01, G14, G38, L20

Suggested Citation

Ducret, Romain, Investors’ Perception of Business Group Membership during An Economic Crisis: Evidence from the COVID-19 Pandemic (October 5, 2022). Available at SSRN: https://ssrn.com/abstract=3889505 or http://dx.doi.org/10.2139/ssrn.3889505

Romain Ducret (Contact Author)

University of Fribourg (Switzerland) - Faculty of Management, Economics and Social Sciences ( email )

Fribourg, CH 1700
Switzerland

HOME PAGE: http://www3.unifr.ch/cgf/en/

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