IDEAS home Printed from https://ideas.repec.org/a/mes/emfitr/v59y2023i8p2493-2506.html
   My bibliography  Save this article

Internal Capital Markets and R&D Investment: Evidence from Korean Chaebols

Author

Listed:
  • Seiwoong Hong
  • Frederick Dongchuhl Oh
  • Donglim Shin

Abstract

This study examines how internal capital markets (ICMs) within business groups affect the financing of research and development (R&D) investments, focusing on Korean chaebols. We find that, on average, chaebol-affiliated firms exhibit lower R&D investment – cash flow sensitivity than standalone firms do. We also find that an affiliated firm’s R&D expenditure is significantly positively associated with the net amount of equity capital received from other affiliates but not significantly related to its own cash flow. These findings indicate that ICMs effectively mitigate affiliated firms’ R&D financing constraints. We further find that this financing constraint mitigation is more pronounced during financial crises and for high-tech firms. Finally, we find that, for chaebols, greater ICM effectiveness leads to better innovative performance. Overall, our study highlights the importance of ICMs for promoting corporate innovation via the reduction of R&D financing constraints.

Suggested Citation

  • Seiwoong Hong & Frederick Dongchuhl Oh & Donglim Shin, 2023. "Internal Capital Markets and R&D Investment: Evidence from Korean Chaebols," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(8), pages 2493-2506, June.
    • Handle: RePEc:mes:emfitr:v:59:y:2023:i:8:p:2493-2506
    DOI: 10.1080/1540496X.2023.2185095
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1540496X.2023.2185095
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1540496X.2023.2185095?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Defang Ma & Liangwei Li & Yuxi Song & Mengkai Wang & Qiaowen Han, 2023. "Corporate Sustainability: The Impact of Environmental, Social, and Governance Performance on Corporate Development and Innovation," Sustainability, MDPI, vol. 15(19), pages 1-16, September.
    2. Bo Zeng & Weimin Zhang & Defang Ma & Chenyang Zhang & Xiao Liu, 2023. "The Impact of Group Control on the Effectiveness of Enterprise Innovation: An Empirical Study," Sustainability, MDPI, vol. 15(13), pages 1-15, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:59:y:2023:i:8:p:2493-2506. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MREE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.