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Does Shareholder Value Orientation or Financial Market Liberalization Slow Down Korean Real Investment?

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  • Hwan-Joo Seo
  • Han Sung Kim
  • Joonil Kim

Abstract

This study empirically tests whether the growing importance of shareholder value orientation and financial market liberalization can explain the decline in Korean real investment since the Asian financial crisis. First, the results indicate no negative relationship between increased payments to financial markets and the slowdown in Korean real investment. Second, the estimation results do not support the assertion that financial investment earnings crowd out Korean real investment. Third, an increase in the level of uncertainty from financial market liberalization reduces real investment by Korean firms. These results suggest that financial market liberalization explains the slowdown in Korean firm real investment for the 1990-2010 period better than shareholder value orientation does.

Suggested Citation

  • Hwan-Joo Seo & Han Sung Kim & Joonil Kim, 2016. "Does Shareholder Value Orientation or Financial Market Liberalization Slow Down Korean Real Investment?," Review of Radical Political Economics, Union for Radical Political Economics, vol. 48(4), pages 633-660, December.
    • Handle: RePEc:sae:reorpe:v:48:y:2016:i:4:p:633-660
    DOI: 10.1177/0486613415603159
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    1. Roberto Veneziani & Luca Zamparelli & Leila E. Davis, 2017. "Financialization And Investment: A Survey Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 31(5), pages 1332-1358, December.

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    More about this item

    Keywords

    shareholder value orientation; financial market liberalization; real investment; financialization;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • D2 - Microeconomics - - Production and Organizations

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