Agency problems and performance of Korean companies after the asian financial crisis: chaebol vs. non-chaebol firms

Abstract

Thi s paper examines whether the performance of Korean companies after the Asian Financial crisis is related to agency problems. The paper also examines whether agency problems have different explanatory power for chaebol vs. non-chaebol firms. The results show that ownership structure is not closely related to stock price performance even though it is marginally significantly related to operating performance. Leverage. especially short-term ckht. and stock return performance are significantly negatively related. It is also shown that firms with more free cash flow produce significantly higher stock returns. Overall. the results indicate that agency problems are not closely related to the post-crisis stock price performance of Korean companies. at least up to December 1999, whereas they have some explanatory power for the operating performance. Moreover. the effects of agency problems on chaebol firms arc similar to those on non-chaebol firms. This paper is based on the paper, "Do Agency Problems Explain the Post Asian Financial Crisis Performance of Korean Companies?'', which was presented at the ''Transforming Korean Business and Management Culture'' conference organized by the Michigan State University. We would like to thank Charles Hadlock, Joonho Hwang, Tim Loughran. Todd Mitton, Jay Ritter. Ben Sopranzetti, and seminar participants at the Michigan State University. Korea University. Seoul National University and the Fal l 2000 Korea Finance Association Meetings, for useful comments.