Does Economic Policy Uncertainty Affect Firm Investment In South Korea? A Comparison Of Chaebol Vs Non-Chaebol Firms
Abstract
I analyze the influence of economic policy uncertainty on firm investment propensity
in South Korea from 1995 to 2019 using South Korea's economic policy uncertainty
index developed by Baker, Davis, and Bloom (2016). My study concludes that raising
ambiguity in economic policy affects investment decisions. Furthermore, by dividing
the test into three groups: Chaebol and Non-Chaebol, Large Chaebol, and Small
Chaebol, I received fascinating results. During times of economic instability, there is
no distinction between Chaebol and non-Chaebol activity. Because Small Chaebol
firms account for the bulk of this data collection, the same phenomenon occurs when I
investigate their association. In contrast, enterprises in the top ten Chaebol corporations
show a negative tendency in investment during periods of economic policy uncertainty.
Despite governmental measures to reduce Chaebol's economic dominance after 1997,
the ten largest Chaebol firms were still permitted to operate as they saw fit due to their
considerable economic impact. They lowered investment decisions more than nonchaebol firms to avoid the greatest amount of harm, exhibiting a significant difference.