| Abstract |
We examine the spillover effects that occur within Korean business groups (i.e., chaebols) by focusing on the market reactions of event firms to announcements of credit rating changes. We find that spillovers driven by the market reactions of event firms exist: both positive spillovers (owing to positive market reactions) and negative spillovers (owing to negative market reactions). Our analyses indicate that negative spillovers are more dominant than positive spillovers. Moreover, a spillover driven by a leading firm within a business group has stronger effects on other firms in the group than that driven by a non-leading firm, suggesting that the market evaluation of a business group is conducted more on the basis of a leading firm than a non-leading firm within a group. Finally, we show that the spillover effects analyzed in our study are more noticeable when the business relationship between the event firm and other affiliated firms is closer. (JEL G14, G24) |