This paper empirically shows that stock returns of firms in business groups are significantly lower than nonbusiness group firms when the product market competition increases. Using the U.S.-Korea Free Trade Agreements as an exogenous shock, we examine the effect of the changes in product market competition on the stock returns of business groups. Difference-in-difference-in-differences estimations support the casual impact of product market competition on stock returns of business groups. Overall, the results support the creative selfdestruction theory for stock returns. Moreover, we suggest evidence that large business groups, such as chaebol may can reduce the external risk through the internal capital market.