@article{e1845661418b4608a3527939ca7cbb1e,
title = "Are better-governed firms more innovative? Evidence from Korea",
abstract = "This study examines the effect of corporate governance quality on firm innovation in Korea, where innovation is very active. We focus on the relationship between a firm's corporate governance score (CGS) and its innovation performance in various empirical settings using manually collected patent data. We find that CGS positively influences firm's innovation activity, which is driven by board's quality and transparent disclosure. This relationship is more evident in chaebol-affiliated firms, suggesting that sound corporate governance is effective in promoting innovation activities when the misalignment between managers{\textquoteright} and other stakeholders{\textquoteright} interests is grave.",
keywords = "Chaebol, Corporate governance, Emerging market, Firm innovation, Patent",
author = "Choi, {Paul Moon Sub} and Chung, {Chune Young} and Vo, {Xuan Vinh} and Kainan Wang",
note = "Funding Information: This paper was presented at the Asian Finance Association 2019 meetings (Ho Chi Minh City, Vietnam). All authors equally contributed to this work. This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea ( NRF-2018S1A5A2A01029148 ). Access to Korea Corporate Governance Service data was obtained via Credit Suisse Securities Korea, where Choi was an advisor. Xuan Vinh Vo does not receive financial support in this research. So Hyeon Kang provided excellent research assistance. The standard disclaimer applies, and all errors are our own. Funding Information: The overall structure of corporate governance in Korea differs from that of comparable economies (Claessens & Yurtoglu, 2013), mainly owing to Korea's unique industrialization process and accelerated growth since the 1960s, which is described as a “rush-to-development” (Han, 1998) and “compressed modernity” (Chang, 1999). Although the economy has grown at an unprecedented rate, the corporate governance of Korean companies has remained opaque, with many largely family-centered firms forming conglomerates known as chaebols.8 In 1997, the Asian financial crisis revealed the unstable foundations of the Korean economy, which became insolvent owing to foreign debt. As a result, the International Monetary Fund (IMF) extended a bailout to the Korean government. In return, the government committed to a large-scale overhaul of the financial sector and mergers between chaebol affiliates with excess capacity and operational inefficiencies. The failure of corporate governance is considered the main reason for the Korean economy's collapse in 1997 (Joh, 2004; Johnson, Boone, Breach, & Friedman, 2000). As a result, Korean regulators began forcing firms to hire more outside directors, and their proportional membership on the boards of Korean firms increased from 12% in 1999 to 37% in 2006 (Black & Kim, 2012; Joh & Jung, 2018). However, this proportion is still significantly lower than that in the United States, which increased from 72% in 1999 to 81% in 2007 (Booth, Cornett, & Tehranian, 2002; Spencer Stuart Board Index).This paper was presented at the Asian Finance Association 2019 meetings (Ho Chi Minh City, Vietnam). All authors equally contributed to this work. This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2018S1A5A2A01029148). Access to Korea Corporate Governance Service data was obtained via Credit Suisse Securities Korea, where Choi was an advisor. Xuan Vinh Vo does not receive financial support in this research. So Hyeon Kang provided excellent research assistance. The standard disclaimer applies, and all errors are our own. Publisher Copyright: {\textcopyright} 2020 Elsevier Inc.",
year = "2020",
month = sep,
doi = "10.1016/j.iref.2020.05.018",
language = "English",
volume = "69",
pages = "263--279",
journal = "International Review of Economics and Finance",
issn = "1059-0560",
publisher = "Elsevier Inc.",
}