Review of Financial Studies
Volume 21, Issue 5, 2008, Page 2015-2060.
 

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Gil S. Bae, Youngsoon S. Cheon, Jun-Koo Kang
https://doi.org/10.1093/rfs/hhn055



Abstract

Using earnings announcement events made by firms belonging to Korean chaebols, we examine propping within a chaebol. Consistent with the market's ex ante valuation of intragroup propping, we find that the announcement of increased (decreased) earnings by a chaebol-affiliated firm has a positive (negative) effect on the market value of other nonannouncing affiliates. The sensitivity of the change in the market value of nonannouncing affiliates to abnormal returns for the announcing firms is higher if the cash flow right of the announcing firm's controlling shareholder is higher. The sensitivity is also higher if the announcing firm is larger, performs well, and has a higher debt guarantee ratio.

JEL

 G34 - Mergers;
Acquisitions;
Restructuring;
Corporate Governance
G14 - Information and Market Efficiency;
Event Studies;
Insider Trading
G32 - Financing Policy;
Financial Risk and Risk Management;
Capital and Ownership Structure;
Value of Firms;
Goodwill