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주 제

토론자

서정원 교수
(성균관대학교)

심형섭 교수
(UNIST)

  
 Abstract

 Using a unique dataset of Korean firms’  separate and consolidated financial statements,  we
 provide novel evidence on the investment and financing behavior of business groups. Compared
 to private firms, public firms invest substantially in equity stakes of affiliated firms-but sparingly 
 in PP&E-and finance most of those investments with equity issue proceeds, rather than with cash
 flows or debt issue proceeds. Public firms’ value tends to drop when they make large investments
 in equity stakes. Business groups’ headquarters designate a relatively well-performing public firm
 as an equity issuer to source capital that is then channeled to relatively poorly-performing firms   
 (by means of the former’s purchase of equity stakes in the latter). Our findings suggest that, in an
 emerging-country market with weak institutions, business groups’ internal capital markets capitalize on
 easy access to public equity in funding value-decreasing expansions. 

 Key words: internal capital market, business group, equity stake, equity issuance, public quity