How does Corporate Structure Affect the Value of Firms in Emerging Markets? Evidence from Korea

In this paper, we examine the time varying effect of corporate structure on firm value in an emerging market using Korean firms. We find that during a good economic situation (a good state from January 2000 to March 2001; a bad state from October 2001 to April 2002), firms recover (suffer) from external shocks and have a much brighter (darker) prospect of investment opportunities and firms with poor corporate structure experience a bigger (smaller) rebound in their share values. These results are robust for different measures of corporate structure and hold when we control for a variety of variables that affect firm performance during these periods. Our evidence suggests that the role of corporate structure has been changed following macroeconomic situations such as stock market index or economic index.