Earticle

The study investigates one of the long-standing, but still controversial issues in modern finance from the international and domestic perspectives. That is, financial components and differences on corporate profitability are identified and compared under the primary hypotheses. Empirical research settings include the sample data as KOSPI-listed chaebol firms, time reference covering the post-era of the global financial turmoil and two differently defined profitability indices measured by the market- and the book-value bases. A majority of total 7 explanatory variables except firm size and leverage ratio reveal their statistically significant power to explain profitability indices for the chaebol firms in the first hypothesis. The results are generally compatible with those obtained from their counterparts of non-chaebol firms. In the second hypothesis applying multinomial logistic model, the chaebol firms are classified into three groups according to the level of profitability. It is then confirmed that variables to represent the market-valued debt ratio, business risk and growth potential are financially discriminating factors among the three groups. Moreover, additional hypotheses to directly or indirectly identify financial profile of the chaebol firms are tested in the study for robustness checks of the results. The study may provide a new vision to identify financial factors of corporate profitability for Korean chaebol firms after the global financial crisis, which can enhance the benefits of interested parties at the government or corporate level in a virtuous cycle.

This study addresses one of the ongoing issues in contemporary finance, which investigates financial aspects on the levels of the chaebol firms' cash hoardings in the domestic capital market. To specify, it may be imperative to search for an optimal level of cash holdings for the domestic firms as well as identifying any changes or trend on the factors to determine the corporate cash reserves in the post-era of the global financial turmoil, taking into account the fact that interest parties at the government and corporate levels, still seem to have a controversy or debate on excess cash savings which may be fundamentally affected or theorized by the rationale of the 'precautionary' and 'transactional' motives. Three hypotheses were postulated and empirically tested for the chaebol firms in the study, such as any transitional changes of the relevant factors on cash holdings, unique attributes of financial factors discriminating between the different type of domestic bourses, and finally any existence of 'optimal' level of corporate cash hoardings, as discussed in sequence.