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Asian Review of Financial Research, Vol., No..
pp.556~602
pp.556~602
How Does Product Market Competition Interact with Internal Corporate Governance? : Evidence from the Korean Economy
Hee Sub Byun Korea University Business School
Ji Hye Lee Korea University Business School
Kyung Suh Park Korea University Business School
We empirically test whether firms that belong to a business group behave differently from stand-alone firms in their decisions regarding internal corporate governance, given product market competition. Existing literature has ignored the possibility that firm characteristics may differentially affect the relationship. We find that the member firms of business groups maintain better internal corporate governance in a non-competitive environment, whereas stand-alone firms do so in a competitive environment. We also find that the positive effects of internal corporate governance on firm value are stronger in a non-competitive environment only for stand-alone firms. We ascribe the detected differences in corporate behavior and performance to differences in the level of competitive pressure to which firms are exposed. When we classify the firms by asset size or product market leadership, we observe a similar pattern.
Hee Sub Byun
Ji Hye Lee
Kyung Suh Park
We empirically test whether firms that belong to a business group behave differently from stand-alone firms in their decisions regarding internal corporate governance, given product market competition. Existing literature has ignored the possibility that firm characteristics may differentially affect the relationship. We find that the member firms of business groups maintain better internal corporate governance in a non-competitive environment, whereas stand-alone firms do so in a competitive environment. We also find that the positive effects of internal corporate governance on firm value are stronger in a non-competitive environment only for stand-alone firms. We ascribe the detected differences in corporate behavior and performance to differences in the level of competitive pressure to which firms are exposed. When we classify the firms by asset size or product market leadership, we observe a similar pattern.
Internal Corporate Governance,Product Market Competition,Firm characteristics,Market Power,Firm Value
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