Business Groups

Working Paper




This study investigates the association between business groups’ influence and the capital allocation efficiency of firms outside the business group. We use a sample of Korean firms (1987 to 2010) to compute an annual index of the collective strength and dominance of large business groups (LBGs) per industry. We discover that this index is negatively associated with non-LBG firms’ industry-level capital allocation efficiency during a period characterized by underdeveloped financial markets and weak investor protection.

February 21 2024