TITLE:
Adjustment Costs and Investment Efficiency of Business Groups in Korea
AUTHORS:
Taegi Kim
KEYWORDS:
Growth, Firm, Investment, Tobin’s q, Business Group, Korea
JOURNAL NAME:
Modern Economy,
Vol.7 No.6,
June
13,
2016
ABSTRACT: This paper investigates investment efficiency of business groups in Korea.
Business groups can centralize knowledge and group resources, which reduces the
cost of entering a new industry. In view of Tobin’s q, the adjustment costs of investment of business group firms are
lower than those of independent firms. The empirical results show that the
adjustment costs of business group firms are lower than those of independent firms,
and that the output-capital ratio of business group firms is greater than that
of independent firms. The results suggest that business group firms contribute to
lowering the adjustment cost and to increasing investment, which, in turn,
contribute to the growth of the Korean economy.