• The Korean Journal of Financial Management
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• v.26 no.4
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• pp.35-61
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• 2009

This paper investigates whether the investment of a chaebol firm depends on financial characteristics such as leverage and growth opportunity. We find that the investment of a chaebol firm increases as its growth opportunity increases. We also find that this positive effect of growth opportunity on the investment is more pronounced in a low-leverage firm than in a high-leverage firm. Unlike chaebol firms, however, the interaction effect between leverage and growth opportunity is not statistically significant for nonchaebol firms.

• Journal of Korea Technology Innovation Society
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• v.10 no.4
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• pp.706-726
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• 2007

This study attempts to empirically investigate the effects of government R&D subsidies on private firm's R&D investment in Korean industry. The R&D subsidy effect is defined as the average percentage change in firm's R&D expenditures between what was actually observed among firms that received a subsidy and what these firms would have spent had the subsidy not been received. To measure the effect we use Difference-in-Differences (DID) model which sign as to whether the relationship between government subsidies and private R&D investments is on stimulating or displacing private R&D expenditures. The differences between this study and previous studies are that we tries to measure the effect of Government R&D across various sited firm groups such as large, small & medium, and venture firms and we add one lag of the subsidy indicator in order to capture the effect of the subsidies on private R&D during 2 consecutive period. Empirically, a firm with government R&D subsidy increases its own R&D investment by 13.9%. Also on average, 1% of government R&D subsidy leads to 0.031% of private R&D increase. The main results of this study are as follows : First, Government R&D subsidies stimulate private firm's R&D expenditures. Second, Government R&D subsidies greatly increase (statistically significant) company financed R&D expenditures only for large firms but had no effect on the R&D expenditures of small & medium sized firms and venture firms.

• International Area Studies Review
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• v.22 no.3
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• pp.121-148
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• 2018

This paper examines the role of accounting conservatism on investment expenditure for non-financial Korean listed firms around the 2007-2008 global financial crisis using a differences-in-differences design. Specifically, this paper examines the association between an ex ante classification of firms by their level of accounting conservatism prior to the credit crisis and the ex post magnitude of the decline in investment. Consistent with prior literature, this study found that firms experienced a decline in their investment when hit by the financial crisis (Campello et al. 2010). And also this study found that firms with more conservative financial reporting experienced a smaller decline in investment activity following the financial crisis than did firms with less conservative financial reporting. Together, the results suggest that negative shocks to the supply of external finance hampers firm-level investment and that conservative financial reporting can lessen the sensitivity of firms' investment to such negative shocks. Next, this study shows that the magnitude of our findings is greater for firms more likely to suffer from underinvestment (as opposed to overinvestment). Firms that are financially constrained or have greater demand for external finance are more likely to experience underinvestment. Consistent with the predictions, this study finds stronger benefits of conservatism for firms that face relatively greater costs in raising external capital (i.e., financially constrained firms) or that have a relatively greater need to do so (i.e., firms that lack internal financial resources). This study also finds that the role for conservatism is greater in firms with a higher level of information asymmetry, consistent with the notion that conservatism mitigates financing frictions arising from information problems.

• Journal of the Economic Geographical Society of Korea
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• v.3 no.2
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• pp.43-61
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• 2000

This study investigate the spatial characteristics and corporate networks of foreign business service firms in Korea. Specifically intrafirm and extrafirm organization of foreign firms are addressed utilizing the corporate network perspective. For this purpose, this study conducted questionnaire and interview surveys for the foreign firms. Parent-subsidiary relationships are focused on the mechanisms by which Transnational Corporations (TNCs) headquarters control and coordinate their foreign affiliates and subsidiaries in order to achieve investment purpose in Korea (overseas market expansion). But extrafirm networks of foreign business services firms in Korea do not appear to play an important role in regional development to date. A low proportion of foreign firms is engaged in academics-industry linkages, and a low number o( foreign firms is formally linked with government organizations, research institutes, and trade associations. To conclude, Foreign direct investment firms in business services in Korea are characteristics by globalized intrafirm networks and localized interfirm and extrafirm networks. It is understood that regional development can be vitalized when Korean local firms have close relationships with technologically advanced foreign firms in tacit knowledge capacity. Foreign firms are able to play an important role in the development of business services in Korea. This study suggests that regional foreign direct investment policy should be targeted towards the corporate networking with foreign firms and domestic firms and incrementation of the potential of foreign firms as a knowledge-intensive industry.

• Journal of the Korean Geographical Society
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• v.36 no.4
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• pp.402-417
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• 2001

This study empahsized the nature of spatial patterns, characteristics and embeddeness of foreign business service firms in Korea utilizing questionnaire survey and interview data. Foreign business services firms are active in forming interfirm networks with clients and supply firms in Korea for widening the market share in Korea. But a low proportion of foreign firms is engaged in academies-industry linkages, government organizations, research institutes, and trade associations. Knowledge transfer and interaction also shows low level of network and the regional development of foreign firms is still in the process of developing, not quite embedded yet. Policy guidances and instituional supports are very essential to strenthen interfirm network and collective learning process of foreing firms in Korea lather than mechanical accumulation of investments. Thus, regional foreign direct investment policy should be targeted towards the incrementation of the potential of foreign firms as a knowledge-intensive industry.

• Management & Information Systems Review
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• v.36 no.3
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• pp.113-130
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• 2017

This study examines the effect of direct investment in Asia on firm value for nonfinancial firms listed on KRX between 2006 and 2015. We also explore whether the mediating effects of cashholdings the relationship between direct investment in Asian markets and corporate value. Recently, companies are increasing their cash holdings for risk management. Cashholdings are causing agent problems, which has a negative impact on corporate value. In this case, when the company conducts active investment activities such as foreign direct investment, it is possible to supply the appropriate funds in a timely manner, thereby cashholdings increase the possibility of success of foreign direct investment and alleviate the agent problem of cash holdings. For the analysis, the number of directly invested firms in Korean listed firms is used as the explanatory variables for the Chinese and Vietnamese markets where foreign direct investment is the most active, and cash holding is set as the moderating variable. As a result, direct investment in China and Vietnam showed a positive (+) relationship with firm value, and cashholdings have a positive the relationship between foreign direct investment and firma value. The implications of this paper are as follows. First, it is suggested that the direct value of direct investment can be enhanced the relationship between direct investment and firm value in Asia. In addition, it can be suggested that cash holdings play a role of effective investment supply in firms that implement foreign direct investment, positively affecting corporate value.

• The Journal of the Korea Contents Association
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• v.22 no.2
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• pp.593-604
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• 2022

This study examines how auditors respond to labor investment inefficiency, specifically its impact on audit fees and audit hours. Using a sample of Korean firms listed on the Korea Stock Exchange from 2003 to 2018, our empirical results indicate that firms involved in inefficient investment in labor incur higher audit fees and audit hours. This implies that auditors consider inefficient labor investment to cause considerable business risk, thus requesting higher external audit fees to compensate for higher audit risk. Furthermore, auditors expend more time and effort while auditing those firms by expanding the audit procedures to reduce the audit risk to an acceptable level. Finally, this study provides empirical evidence on whether the investment inefficiency in labor, an important factor in firms' competitiveness, incur higher audit fees as well as audit hours.

• KDI Journal of Economic Policy
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• v.13 no.4
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• pp.31-57
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• 1991

Korean firms of all sizes, from virtually every industry, have used and are using the term "excessive competition" to describe the state of their industry and to call for government interventions. Moreover, the Korean government has frequently responded to such calls in various ways favorable to the firms, such as controlling entry, curbing capacity investments, or allowing collusion. Despite such interventions' impact on the overall efficiency on the Korean economy as well as on the wealth distribution among diverse groups of economic agents, the term "excessive competition", the basis for the interventions, has so far escaped rigorous scrutiny. The objective of this paper is to clarify the notion of "excessive competition" and "over-investment" which usually accompanies "excessive competition", and to examine the circumstances under which they might occur. We first survey the cases where the terms are most widely used and proceed to examine those cases to determine if competition is indeed excessive, and if so, what causes "excessive competition". Our main concern deals with the case in which the firms must make investment decisions that involve large sunk costs while facing uncertain demand. In order to analyze this case, we developed a two period model of capacity precommitment and the ensuing competition. In the first period, oligopolistic firms make capacity investments that are irreversible. Demand is uncertain in period 1 and only the distribution is known. Thus, firms must make investment decisions under uncertainty. In the second period, demand is realized, and the firms compete with quantity under realized demand and capacity constraints. In the above setting, we find that there is "no over-investment," en ante, and there is "no excessive competition," ex post. As measured by the information available in period 1, expected return from investment of a firm is non-negative, overall industry capacity does not exceed the socially optimal level, and competition in the second period yields an outcome that gives each operating firm a non-negative second period profit. Thus, neither "excessive competition" nor "over-investment" is possible. This result will generally hold true if there is no externality and if the industry is not a natural monopoly. We also extend this result by examining a model in which the government is an active participant in the game with a well defined preference. Analysis of this model shows that over-investment arises if the government cannot credibly precommit itself to non-intervention when ex post idle capacity occurs, due to socio-political reasons. Firms invest in capacities that exceed socially optimal levels in this case because they correctly expect that the government will find it optimal for itself to intervene once over-investment and ensuing financial problems for the firms occur. Such planned over-investment and ensuing government intervention are the generic problems under the current system. These problems are expected to be repeated in many industries in years to come, causing a significant loss of welfare in the long run. As a remedy to this problem, we recommend a non-intervention policy by the government which creates and utilizes uncertainty. Based upon an argument which is essentially the same as that of Kreps and Wilson in the context of a chain-store game, we show that maintaining a consistent non-intervention policy will deter a planned over-investment by firms in the long run. We believe that the results obtained in this paper has a direct bearing on the public policies relating to many industries including the petrochemical industry that is currently in the center of heated debates.

• Asia-Pacific Journal of Business Venturing and Entrepreneurship
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• v.18 no.6
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• pp.147-157
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• 2023

This paper investigates the financial factors affecting angel investors' investment decisions for 818 firms from 2009 to 2018 in the Korean venture investment market. We construct a quasi-experimental design using propensity scoring matching and compare the investment determinants between investment firms and matching firms. The main empirical findings are as follows. First, we find that angel investors are more likely to choose firms based on a firm's growth such as profit and assets rather than profitability or financial stability. In addition, we identify that they prefer the firm not only higher intangible assets but also higher R&D expenditures. Second, we find that angel investors consider both growth and activity ratios in the firms for over three years and have entered the mid-stage of startups. Overall, we confirm that the investment decision of angel investors mainly focuses on the venture startups' growth trend or future growth potential rather than the realized profitability or financial stability. We also infer that the possibility of performance creation is an important investment factor along with growth for the mid-stage startup.

• The Journal of Industrial Distribution & Business
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• v.13 no.1
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• pp.11-21
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• 2022

Purpose: This study predicted cost asymmetry as a determinant of investment efficiency, and empirically analyzed the relationship between cost stickiness and investment efficiency. Research design, data and methodology: Using a sample of 4,382 Korean firm-year observations over 2011-2017 period, I examined the relationship between cost stickiness and investment efficiency. Asymmetrical cost behavior is measured as model of Homburg and Nasev (2008) and model of Park, Koo, and Pae (2012). Investment efficiency is measured as Chen, Hope, Li, and Wang (2011)'s model. Results: Firms with cost stickiness are less efficient in their investment than firms with non-cost stickiness. In other words, cost stickiness is an empirical result that supports the previous research on cost decision-making from perspective of managers pursuing private benefits due to information asymmetry. Conclusions: By showing that the manager's decision-making on the cost behavior affects the investment efficiency corresponding to capital management, the implications for the mechanism for efficient capital management are provided. Through the empirical results, it was shown that the cost stickiness is a product of opportunistic cost decision-making due to information asymmetry, and it is to present evidence that expands the meaning of the causes of asymmetric cost behavior.