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Governance System Effectiveness Following the Crisis: the case of Korean business group headquarters

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  • James Jinho Chang
  • Hyun‐Han Shin

Abstract

Various corporate governance initiatives were adopted in Korea following a major corporate governance failure, identified as a direct cause of the Asian Financial Crisis of 1997–1998. Our findings indicate that, before the crisis, the likelihood of replacing poorly performing CEOs was not related to business group (chaebol) affiliation. However, after the Asian Financial Crisis, we find CEO turnover sensitivity to performance is greater in chaebol firms than in stand‐alone firms. These findings indicated improved monitoring following reforms initiated by the Korean government, NGOs and other capital market participants. These findings have implications for the effectiveness of corporate governance in US firms following governance restructuring imposed by the SEC, the government and various market participants.

Suggested Citation

  • James Jinho Chang & Hyun‐Han Shin, 2006. "Governance System Effectiveness Following the Crisis: the case of Korean business group headquarters," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(2), pages 85-97, March.
    • Handle: RePEc:bla:corgov:v:14:y:2006:i:2:p:85-97
    DOI: 10.1111/j.1467-8683.2006.00489.x
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    1. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    2. Tarun Khanna & Krishna Palepu, 1999. "Emerging Market Business Groups, Foreign Investors, and Corporate Governance," NBER Working Papers 6955, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Jong-Hun Park & Changsu Kim & Young Kyun Chang & Dong-Hyun Lee & Yun-Dal Sung, 2018. "CEO Hubris and Firm Performance: Exploring the Moderating Roles of CEO Power and Board Vigilance," Journal of Business Ethics, Springer, vol. 147(4), pages 919-933, February.
    2. Jong-Seo Choi & Young-Min Kwak & Chongwoo Choe, 2014. "Earnings Management Surrounding CEO Turnover: Evidence from Korea," Abacus, Accounting Foundation, University of Sydney, vol. 50(1), pages 25-55, March.
    3. Holmes, R. Michael & Hoskisson, Robert E. & Kim, Hicheon & Wan, William P. & Holcomb, Tim R., 2018. "International strategy and business groups: A review and future research agenda," Journal of World Business, Elsevier, vol. 53(2), pages 134-150.
    4. Park, Jong-Hun & Kim, Changsu & Sung, Yun-Dal, 2014. "Whom to dismiss? CEO celebrity and management dismissal," Journal of Business Research, Elsevier, vol. 67(11), pages 2346-2355.
    5. ., 2010. "Recent Evolution of the Business Sector: Chaebols and SMEs," Chapters, in: The Korean Economy in Transition, chapter 8, Edward Elgar Publishing.
    6. Chen, I-Ju, 2014. "Financial crisis and the dynamics of corporate governance: Evidence from Taiwan's listed firms," International Review of Economics & Finance, Elsevier, vol. 32(C), pages 3-28.
    7. Xiaowei Rose Luo & Chi-Nien Chung, 2013. "Filling or Abusing the Institutional Void? Ownership and Management Control of Public Family Businesses in an Emerging Market," Organization Science, INFORMS, vol. 24(2), pages 591-613, April.
    8. Khalil Jebran & Shihua Chen, 2023. "Can we learn lessons from the past? COVID‐19 crisis and corporate governance responses," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(1), pages 421-429, January.
    9. Yonghyun Kwon & Seung Hun Han & Young Woo Koh, 2022. "Production Suspension, Corporate Governance, and Firm Value," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(10), pages 2711-2735, August.

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