Publications
Detailed Information
An Empirical Study on the Effect of Financial Structure on Investment: Does Debt Covenant Shrink Corporate Investment?
Cited 0 time in
Web of Science
Cited 0 time in Scopus
- Authors
- Issue Date
- 2010-04
- Citation
- Seoul Journal of Economics, Vol.23 No.2, pp. 283-320
- Keywords
- Investment ; Debt covenant ; Main debtor group ; Financial regulation
- Abstract
- After the crisis, affiliated firms of the business conglomerates
selected as main debtor groups are mandated to contract the debt
covenant that enforces to improve financial structure. This paper
examines how the regulation on financial structure of main debtor
groups affects investment of affiliated firms. Even though several
economists insist that the regulation of the debt covenant ―
including 200 % debt ratio cap ― makes the investment of main
debtor groups decline, there is no empirical work testing the effect
of the regulation on the investment in Korea. The empirical results
of this study show that due to the debt covenant, the effect of debt
on investment decreased after the crisis, and that specially during
1998 to 2000, the facility investment of affiliated firms in main
debtor groups remarkably declined. Additionally, we examine whether
a firm's control-ownership disparity affected its investment. Contrary
to existing empirical papers, results of this study show that
control-ownership disparity is not related with investment statistically,
and so mean that a firm's ownership structure does not
induce its excess investment.
- ISSN
- 1225-0279
- Language
- English
- Files in This Item:
Item View & Download Count
Items in S-Space are protected by copyright, with all rights reserved, unless otherwise indicated.