Examining Political Connections to Study Institutional Change: Evidence from Two Unexpected Election Outcomes in South Korea

TY - JOUR

T1 - Examining Political Connections to Study Institutional Change

T2 - Evidence from Two Unexpected Election Outcomes in South Korea

AU - Jager, Kai

AU - Kim, Seungjun

PY - 2019/4/1

Y1 - 2019/4/1

N2 - We argue that the analysis of multiple political connections in an event study framework can improve the study of institutional change. Based on a unique dataset of multiple political relationships of 4,936 South Korean board of director members, we show that the large business conglomerates, the chaebol, did not benefit from the unexpected conservative election victories in the 2012 South Korean parliamentary and presidential elections. By contrast, personal connections to candidates and to the opposition party were still considered to matter for small firms. Our findings suggest that Korea's political economy has evolved into a hybrid regime in which the political power of large multinational corporations is limited, but the influence of political connections is still relevant for smaller firms. The corruption scandal that led to the impeachment of President Park in 2017 and the long‐term development of market capitalization appear to be congruent with the results of our study.

AB - We argue that the analysis of multiple political connections in an event study framework can improve the study of institutional change. Based on a unique dataset of multiple political relationships of 4,936 South Korean board of director members, we show that the large business conglomerates, the chaebol, did not benefit from the unexpected conservative election victories in the 2012 South Korean parliamentary and presidential elections. By contrast, personal connections to candidates and to the opposition party were still considered to matter for small firms. Our findings suggest that Korea's political economy has evolved into a hybrid regime in which the political power of large multinational corporations is limited, but the influence of political connections is still relevant for smaller firms. The corruption scandal that led to the impeachment of President Park in 2017 and the long‐term development of market capitalization appear to be congruent with the results of our study.

KW - Chaebol

KW - South Korea

KW - corruption

KW - event study methodology

KW - institutional change

KW - networks

KW - political connections

KW - political economy

KW - rent-seeking

UR - http://www.scopus.com/inward/record.url?scp=85059561258&partnerID=8YFLogxK

U2 - 10.1111/twec.12755

DO - 10.1111/twec.12755

M3 - Article

SN - 0378-5920

VL - 42

SP - 1152

EP - 1179

JO - WORLD ECONOMY

JF - WORLD ECONOMY

IS - 4

ER -