Abstract
Utilizing a large sample of South Korean firms, this paper explores
the impact of corporate governance in an emerging market country
dominated by a few large business groups. Firms affiliated with the
top five groups (chaebol) exhibit significantly lower performance
and significantly higher sales growth relative to other firms. Furthermore,
top executive turnover is unrelated to performance for top chaebol
firms, indicating a breakdown of internal corporate governance for
the largest business groups. Internal corporate governance appears
much more effective for firms unrelated to the top chaebol as managers
at poorly performing firms are significantly more likely to lose
their job. These results imply that the lack of properly functioning
internal corporate governance among the top chaebol, which dominate
the Korean economy, may have increased the severity of the recent
financial crisis. © 2002 Elsevier Science B.V. All rights reserved.
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