Proceedings of 5th Asia-Pacific Business Research Conference
17 - 18 February, 2014, Hotel Istana, Kuala Lumpur, Malaysia, ISBN: 978-1-922069-44-3
The Value of Political Connections and Chaebol
Myung S Choi, Janice C Y How* and Peter Verhoeven
We examine the value of political connections in Korea by constructing a unique dataset that allows us to
identify the form and extent of the connections. Results show firms’ membership to chaebol plays a key
role in determining the value of political connections. Politically connected chaebol firms experience
substantial price increases following the establishment of the connection than other firms, but the reverse
is found for other (non-chaebol) connected firms. The results are robust when we define political
connection at the business group level, suggesting that there is a spill over in the value of connections
from the connected firm to other affiliate members in the same group. Connections through marital
networks and to powerful politicians are the most valuable.
Keywords: Political Connections, Chaebol, Marital Network, Social Network, Korea
JEL Classifications: G30, G34, G38
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Janice C Y How, *Corresponding author: Janice How, School of Economics and Finance, Queensland University of
Technology. Australia. Email: janice.how@qut.edu.au,
Myung S Choi, School of Economics and Finance, Queensland University of Technology, Australia.
Peter Verhoeven, School of Economics and Finance, Queensland University of Technology, Australia.