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The Role of Political Collusion in Corporate Performance in the Korean Market

Author

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  • Daeheon Choi

    (College of Business Administration, Kookmin University, 77 Jeongneung-ro, Seongbuk-gu, Seoul 02707, Korea)

  • Chune Young Chung

    (School of Business Administration, College of Business and Economics, Chung-Ang University, 84 Heukseok-ro, Dongjak-gu, Seoul 06974, Korea)

  • Soon-Ihl Samuel Hong

    (School of Business Administration, College of Business and Economics, Chung-Ang University, 84 Heukseok-ro, Dongjak-gu, Seoul 06974, Korea)

  • Jason Young

    (College of Business, Washington State University, Pullman, WA 99164, USA)

Abstract

Many studies investigate collusion between political connections and firm performance, but Korean research on this topic is not very diverse. This study, based on financial data of listed Korean companies spanning the period from the 15th to the 19th Korean governments, analyzes whether political connections between governments and enterprises have a positive, negative, or no correlation with firm performance. The results show that the average return on assets for politically connected firms in the sample tends to be 10% higher than the corresponding value for sample firms that are not politically connected. Since existing studies measure political connections in a fragmented way, this study offers necessary implications for exploring the numerous structural problems of and solutions to the chronic issues currently faced by the Korean economy, as it investigates the economic policies from 1998 to 2018 and their influences on firm performance through the analysis of longer-term data.

Suggested Citation

  • Daeheon Choi & Chune Young Chung & Soon-Ihl Samuel Hong & Jason Young, 2020. "The Role of Political Collusion in Corporate Performance in the Korean Market," Sustainability, MDPI, vol. 12(5), pages 1-18, March.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:5:p:2031-:d:329433
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