Journal of Financial Economics
Volume 71, Issue 2, February 2004, Pages 265–313
 

Jae-Seung Baek (a), Jun-Koo Kang (b), , , Kyung Suh Park (c)
a College of Economics and Business, Hankuk University of Foreign Studies, KyungGi-Do, South Korea
b Department of Finance, Eli Broad College of Business, Michigan State University, East Lansing, MI 48824, USA
c College of Business Administration, Korea University, Seoul, South Korea

http://dx.doi.org/10.1016/S0304-405X(03)00167-3

Abstract
During the 1997 Korean financial crisis, firms with higher ownership concentration by unaffiliated foreign investors experienced a smaller reduction in their share value. Firms that had higher disclosure quality and alternative sources of external financing also suffered less. In contrast, chaebol firms with concentrated ownership by controlling family shareholders experienced a larger drop in the value of their equity. Firms in which the controlling shareholders’ voting rights exceeded cash flow rights and those who borrowed more from the main banks also had lower returns. Our results suggest that change in firm value during a crisis is a function of firm-level differences in corporate governance measures.

Keywords
Corporate governance; Firm value; Chaebol; Controlling shareholder; Main bank