Real exchange rate shocks and new product margins in the export market

This study examines the impact of industry real exchange rate (RER) shocks on plant and product exports using a comprehensive dataset for South Korea from 1990 to 1996. We find that RER changes have heterogeneous effects on real exports of existing exporters in terms of their productivity, and the positive RER depreciation effect on exports is more pronounced for less productive plants. At a product level, we find new evidence that a weak home currency prompts exporters to introduce new products to the export market, especially more remarkable for low-productivity plants. In contrast, a strong home currency leads to product exit with less significance.     

Does venture capital investment enhance corporate innovation? Evidence from Korea

We examine whether venture capital (VC) investment enhances corporate innovation in Korea. Using a matched sample of 802 firms from 1998 to 2012, we find that after the first round of VC investment, VC-backed firms are more innovative than non-VC-backed firms. Our results suggest that the positive influence of VC investment largely comes from the ability of VC firms to reduce information asymmetry between investors and ventures: VC funds managed by independent venture capitalists significantly enhance corporate innovation, whereas those managed by governmental venture capitalists do not. Furthermore, this positive influence becomes more pronounced where there is greater information asymmetry. Finally, we show that funds with profit-based compensation structures are more likely to encourage corporate innovation than those with fee-based compensation structures.     

Do related party transactions affect family firm valuations?

We examine the likelihood and value relevance of related party transactions in family firms. Based on an extensive hand-collected sample, we find that founder-led family firms are more likely to enter into related party transactions than other firms. We also find that the founder-led family firm valuation premium is reduced when these firms disclose related party transactions, especially opportunistic related party transactions. We also examine the significant change in related party transaction reporting regulations enacted in 2006 and find that it led to a decline in the number of value-decreasing related party transactions for founder-led family firms. We find a corresponding decrease in the detrimental effect of related party transactions on founder-led family firms’ valuation. Our results suggest that changes in the 2006 SEC related party transaction reporting regulations better protected minority shareholders from wealth extraction via related party transactions in founder-led family firms.     

Profitability of Noisy Certification in the Presence of Loss Averse Buyers*

We study how the inaccuracy of a costly certification technology affects a monopolistic seller's profitability. We compare three scenarios: no certification, a 100% accurate certification, and a 50% accurate certification that produces accurate evaluations half the time. The noisy certification environment is never the most profitable and, depending on the buyers' loss aversion, can be the least profitable. However, a noisy certification can be more profitable than an accurate one, as it discourages the over-certification that occurs in an accurate certification environment. Experimentally, the noisy certification is shown to be the least profitable treatment, whereas the accurate certification is shown to be the most profitable.