Yonghyun Kwon’s research while affiliated with Changwon National University and other places

This study investigates the effects of planned and unplanned production suspension on firm value. We find that the increased business risk caused by the production suspension negatively affects firm value. Additionally, good corporate governance alleviates the negative effect of planned suspensions, while only firm-specific factors affect unplanned suspensions. Moreover, among firms facing unplanned suspensions, those with strong governance recover faster than firms with weak governance because the former have stable managerial structures. Finally, business group-affiliated firms cope with planned production suspensions well, whereas they are more vulnerable to unplanned suspensions. The result suggests that the group-level supplier-demander relationships have potential business risk owing to low flexibility in unexpected business situations.

This study examines the effect of business group structures on corporate social responsibility (CSR) performance of Korean firms. We find that the chaebol affiliation is, on average, positively related to CSR performance. We attribute this phenomenon to two main elements—CSR corporate foundations (or headquarters) and a spillover effect within the chaebol business group. Conversely, family control is found to be negatively associated with CSR performance. Furthermore, we find a positive relation between CSR performance and the firm value measured by Tobin's Q. Our results suggest that CSR headquarters seem to play an important role in improving CSR performance through the efficient allocation of internal resources. Finally, the group-level financial donations, an important CSR activity, seem to have a spillover effect on CSR performance within the business group. This result is consistent with internal capital markets being efficiently utilized by Korean business groups.

This study examines the effect of controlling shareholders’ preference on the payout policy of Korean firms. Using a sample of 9495 firm-year observations, we find that firms with individual controlling shareholders (family-owned firms) have a lower payout ratio than those with non-individual controlling shareholders. Further, firms with higher family-individual controlling shareholder ownership by individual controlling shareholders are reluctant to pay cash dividends in family business groups. These results are consistent with the conservative payout hypothesis. An additional test indicates that family business groups’ group-level payout tendency influences all group-affiliated firms’ payout policies. The results suggest that controlling shareholders’ preference for cash dividends determines payout policy.

We examine the negative spillover from one group-affiliated firm to other group-affiliated firms in the same business group, using credit rating downgrade announcement data in Korea. We hypothesize that the existence of controlling shareholders and internal capital markets is a major cause of the negative spillover. We find that the financial constraints of a group-affiliated firm negatively affect the value of other group affiliates. Furthermore, we show that both the parent–subsidiary relationship and the credit rating difference between a downgrade firm and its group-affiliated firms affect the extent of negative spillover. In addition, our robustness test results support the argument that the internal capital market within a business group is a key factor in understanding negative spillovers.

We examine the impact of ownership structure on the post-performance of Korean firms that go public as the result of a reverse merger. Although a reverse-merger announcement has positive cumulative abnormal returns (CARs), we find that 24.8% of reverse-merged firms become delisted because of poor post-performance, seemingly due to the agency problem. We also find that expected changes in management after a reverse merger positively affect the CARs of public target firms around the time of the reverse-merger announcement. However, the post-performance of reverse-merged firms is relatively poor compared to firms that undertake regular initial public offerings. Further, we find that ownership concentration alleviates poor performance following a reverse merger.

We investigate 589 production suspension announcements during from 2000 to 2015 in Korea to identify determinants of production suspension, event, operating and financial characteristics. We find that restructuring announcements have negative impact on stock returns while other reasons such as labor dispute and disaster, do not have. We show new evidence that the firm experiences restructuring and permanent plant closing has significantly more negative impact on the stock market. Also we find that the firm possesses low financial risk has significantly more positive impact on the stock returns. It seems that, experiencing sales declining is not the determinant of production suspension.

We examine the knock-on effect of credit rating changes in Korean Chaebol. We show that credit rating changes of chaebol-affiliated firm share the effect of credit rating change with related affiliates because: (1) chaebol affiliates share their internal capital markets and (2) chaebol affiliates are bounded together by cross-holdings. We conclude that impact of credit rating change of chaebol-affiliated firm spills over to other affiliates included in the same chaebols, and cross-holdings may determine the extent of the knock-on effect.

This paper examines announcement effect of public tender offer process in Korea. We find that firms are more affected by selection of the preferred negotiator date than LOI submission date. Specifically only the firms exempted from preferred negotiator show significantly negative effect, and the financial crisis has significantly greater negative effect on those firms. Also the result shows that lower insider and largest ownership increase the probability of giving up the deal of non-chaebol affiliated firms. Overall we find that selection of the preferred negotiator has significant meaning, and ownership structure affects a firm’s intermediate merger process.