• Korean small business review
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• v.31 no.4
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• pp.67-93
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• 2009

The purpose of this paper is to explore the relations between financial constraints and dividend smoothing of innovative small and medium sized enterprises(SMEs) listed on Korea Securities Market and Kosdaq Market of Korea Exchange. The innovative SMEs is defined as the firms with high level of R&D intensity which is measured by (R&D investment/total sales) ratio, according to Chauvin and Hirschey (1993). The R&D investment plays an important role as the innovative driver that can increase the future growth opportunity and profitability of the firms. Therefore, the R&D investment have large, positive, and consistent influences on the market value of the firm. In this point of view, we expect that the innovative SMEs can adjust dividend payment faster than the noninnovative SMEs, on the ground of their future growth opportunity and profitability. And also, we expect that the financial unconstrained firms can adjust dividend payment faster than the financial constrained firms, on the ground of their financing ability of investment funds through the market accessibility. Aivazian et al.(2006) exert that the financial unconstrained firms with the high accessibility to capital market can adjust dividend payment faster than the financial constrained firms. We collect the sample firms among the total SMEs listed on Korea Securities Market and Kosdaq Market of Korea Exchange during the periods from January 1999 to December 2007 from the KIS Value Library database. The total number of firm-year observations of the total sample firms throughout the entire period is 5,544, the number of firm-year observations of the dividend firms is 2,919, and the number of firm-year observations of the non-dividend firms is 2,625. About 53%(or 2,919) of these total 5,544 observations involve firms that make a dividend payment. The dividend firms are divided into two groups according to the R&D intensity, such as the innovative SMEs with larger than median of R&D intensity and the noninnovative SMEs with smaller than median of R&D intensity. The number of firm-year observations of the innovative SMEs is 1,506, and the number of firm-year observations of the noninnovative SMEs is 1,413. Furthermore, the innovative SMEs are divided into two groups according to level of financial constraints, such as the financial unconstrained firms and the financial constrained firms. The number of firm-year observations of the former is 894, and the number of firm-year observations of the latter is 612. Although all available firm-year observations of the dividend firms are collected, deletions are made in the case of financial industries such as banks, securities company, insurance company, and other financial services company, because their capital structure and business style are widely different from the general manufacturing firms. The stock repurchase was involved in dividend payment because Grullon and Michaely (2002) examined the substitution hypothesis between dividends and stock repurchases. However, our data structure is an unbalanced panel data since there is no requirement that the firm-year observations data are all available for each firms during the entire periods from January 1999 to December 2007 from the KIS Value Library database. We firstly estimate the classic Lintner(1956) dividend adjustment model, where the decision to smooth dividend or to adopt a residual dividend policy depends on financial constraints measured by market accessibility. Lintner model indicates that firms maintain stable and long run target payout ratio, and that firms adjust partially the gap between current payout rato and target payout ratio each year. In the Lintner model, dependent variable is the current dividend per share(DPS_t), and independent variables are the past dividend per share(DPS_t-1) and the current earnings per share(EPS_t). We hypothesized that firms adjust partially the gap between the current dividend per share(DPS_t) and the target payout ratio(Ω) each year, when the past dividend per share(DPS_t-1) deviate from the target payout ratio(Ω). We secondly estimate the expansion model that extend the Lintner model by including the determinants suggested by the major theories of dividend, namely, residual dividend theory, dividend signaling theory, agency theory, catering theory, and transactions cost theory. In the expansion model, dependent variable is the current dividend per share(DPS_t), explanatory variables are the past dividend per share(DPS_t-1) and the current earnings per share(EPS_t), and control variables are the current capital expenditure ratio(CEA_t), the current leverage ratio(LEV_t), the current operating return on assets(ROA_t), the current business risk(RISK_t), the current trading volume turnover ratio(TURN_t), and the current dividend premium(DPREM_t). In these control variables, CEA_t, LEV_t, and ROA_t are the determinants suggested by the residual dividend theory and the agency theory, ROA_t and RISK_t are the determinants suggested by the dividend signaling theory, TURN_t is the determinant suggested by the transactions cost theory, and DPREM_t is the determinant suggested by the catering theory. Furthermore, we thirdly estimate the Lintner model and the expansion model by using the panel data of the financial unconstrained firms and the financial constrained firms, that are divided into two groups according to level of financial constraints. We expect that the financial unconstrained firms can adjust dividend payment faster than the financial constrained firms, because the former can finance more easily the investment funds through the market accessibility than the latter. We analyzed descriptive statistics such as mean, standard deviation, and median to delete the outliers from the panel data, conducted one way analysis of variance to check up the industry-specfic effects, and conducted difference test of firms characteristic variables between innovative SMEs and noninnovative SMEs as well as difference test of firms characteristic variables between financial unconstrained firms and financial constrained firms. We also conducted the correlation analysis and the variance inflation factors analysis to detect any multicollinearity among the independent variables. Both of the correlation coefficients and the variance inflation factors are roughly low to the extent that may be ignored the multicollinearity among the independent variables. Furthermore, we estimate both of the Lintner model and the expansion model using the panel regression analysis. We firstly test the time-specific effects and the firm-specific effects may be involved in our panel data through the Lagrange multiplier test that was proposed by Breusch and Pagan(1980), and secondly conduct Hausman test to prove that fixed effect model is fitter with our panel data than the random effect model. The main results of this study can be summarized as follows. The determinants suggested by the major theories of dividend, namely, residual dividend theory, dividend signaling theory, agency theory, catering theory, and transactions cost theory explain significantly the dividend policy of the innovative SMEs. Lintner model indicates that firms maintain stable and long run target payout ratio, and that firms adjust partially the gap between the current payout ratio and the target payout ratio each year. In the core variables of Lintner model, the past dividend per share has more effects to dividend smoothing than the current earnings per share. These results suggest that the innovative SMEs maintain stable and long run dividend policy which sustains the past dividend per share level without corporate special reasons. The main results show that dividend adjustment speed of the innovative SMEs is faster than that of the noninnovative SMEs. This means that the innovative SMEs with high level of R&D intensity can adjust dividend payment faster than the noninnovative SMEs, on the ground of their future growth opportunity and profitability. The other main results show that dividend adjustment speed of the financial unconstrained SMEs is faster than that of the financial constrained SMEs. This means that the financial unconstrained firms with high accessibility to capital market can adjust dividend payment faster than the financial constrained firms, on the ground of their financing ability of investment funds through the market accessibility. Futhermore, the other additional results show that dividend adjustment speed of the innovative SMEs classified by the Small and Medium Business Administration is faster than that of the unclassified SMEs. They are linked with various financial policies and services such as credit guaranteed service, policy fund for SMEs, venture investment fund, insurance program, and so on. In conclusion, the past dividend per share and the current earnings per share suggested by the Lintner model explain mainly dividend adjustment speed of the innovative SMEs, and also the financial constraints explain partially. Therefore, if managers can properly understand of the relations between financial constraints and dividend smoothing of innovative SMEs, they can maintain stable and long run dividend policy of the innovative SMEs through dividend smoothing. These are encouraging results for Korea government, that is, the Small and Medium Business Administration as it has implemented many policies to commit to the innovative SMEs. This paper may have a few limitations because it may be only early study about the relations between financial constraints and dividend smoothing of the innovative SMEs. Specifically, this paper may not adequately capture all of the subtle features of the innovative SMEs and the financial unconstrained SMEs. Therefore, we think that it is necessary to expand sample firms and control variables, and use more elaborate analysis methods in the future studies.

• Journal of the Korea Society of Computer and Information
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• v.6 no.2
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• pp.123-128
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• 2001

In recent years, there has been growing interest among academics and practitioners in improving information system effectiveness of manufacturing firms in Korea. This study is conducted to find critical factors which influence information system effectiveness of manufacturing firms in Korea. The result of this study shows that (1) use of information system for decision-making and (2) use of information system for buyer - supplier relationship and (3) support of top management are very important to increase information system effectiveness. In addition, this study provides information system effectiveness of small manufacturing firms are regarded inferior to large manufacturing firms in Korea.

• The Journal of Industrial Distribution & Business
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• v.9 no.5
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• pp.37-46
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• 2018

Purpose - This paper explores the determinants of bank lending to firms during and after the global financial crisis using firm- and bank-level data to answer the questions what caused the contraction of lending to firms despite the loosening monetary policy during this crisis period. Research design, data, and methodology - We investigate the effects of the monetary policy that followed the global financial crisis on firms borrowing. We use a dynamic panel model to address how firms lending respond to monetary policy. The data are obtained from CRETOP and we consider the manufacturing sector for the analysis to control for unobserved heterogeneity such as industry-specific shocks. Results - The findings from the empirical analysis suggest that both bank- and firm-level characteristics are significant determinants of bank lending. Especially, we find that corporate risk, measured by default risk, is one of the key factors that led to a decline in lending during the crisis. Conclusions - This paper shows that companies borrow more from liquid banks, and high bank capital can also contribute to an increase in a firm's borrowing from banks. Especially, the results confirm that the default rate measured at the firm level has increased during and after the global financial crisis, which implies that default risk interplays with other firm and bank-level characteristics.

• KDI Journal of Economic Policy
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• v.27 no.2
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• pp.89-121
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• 2005

This paper investigates the empirical relationship between investment and uncertainty using the firm level data of Korean manufacturing sector. Empirical results show that uncertainty is negatively correlated with investment only for the post-crisis sample period. In particular, the negative effect of uncertainty on investment is more significant for low interest coverage ratio firms, high debt-asset ratio firms and small firms. The results are consistent with the claim that firms act in a more risk-averse manner after the financial crisis. This paper also finds a significant sensitivity of investment to cash flows only for the pre-crisis sample period, suggesting that financial constraint is not relatively important in explaining low investment after the financial crisis.

• Journal of the Economic Geographical Society of Korea
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• v.16 no.1
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• pp.37-49
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• 2013

This paper investigates social networks of high technology firms, located in a newly developed industrial area, called 'Daedeok Technovalley' in Daejeon, Korea. While the Vally was developed as an extension of Daedeok Science Park in Daejeon, it host 400 or so technology-intensive firms. A questionnaire survey was conducted to collect data on the firms of the Vally, during January 2010, and obtained 201 completed questionnaires. Additional data, such as sales amount and employment, were collected to measure the changes of firm size. This research analysed these data to argue that the enterprises have established some networks with local institutions; however, the networks do not significantly affect on the growth of the firms.

• Proceedings of the Technology Innovation Conference
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• 1998.06a
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• pp.57-90
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• 1998

This study attempts to explore the evolution paths of Korean SMEs'strategies and their technological teaming processes. Several different evolution paths are identified based on a dynamic strategic group analysis of 115 SMEs'strategy in the Korean electronic component industry for the period of 1990-1995. Further, inadept case analyses on technological learning processes in 5 firms are undertaken. Major findings of this study can be summarized as follows : 1) There are three dominant evolution paths in SMEs'strategy. First path indicates the evolution from a subcontractor or petty imitator group(a strategic group with the narrow product/market domain and the low level of accumulated resource/capabilities) into an innovator group(a strategic group with the narrow domain but high level of technological capability) by accumulating technological capabilities. Second, some firms move from a subcontractor group into a generalizer group(a strategic group with broad product/market domain but relatively low level of technological capability) by simply adding product lines. Third path involves firms which evolve from a subcontractor group into a production focus group(a strategic group with high level of production capability) by investing in production capabilities. 2) An in-depth case analysis shows those who succeeded in technological learning are managed by CEOs, who have technological expertise and strategic vision, and have made an effort to establish management practices to support innovation, such employee educational program, performance-based reward system, etc. The successful firms also aggressively pursue diverse external linkages with outside technology sources to learn product and process technologies. Fiendly, this study discusses several implications of the findings for the theoretical development and strategic management of small firms in Korea.

• East Asian Economic Review
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• v.18 no.4
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• pp.395-423
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• 2014

This study examines the role of trade finance in the trade collapse of 2008-09 from the perspective of the Korean economy. We use two approaches. Firstly, as background to a more formal analysis, we make a casual observation on the behavior of aggregate data on trade finance, on which Korea has relatively abundant data. Aggregate data do not convincingly support the view that trade finance played an active role in causing the trade collapse. The measures of trade finance and the value of trade both dropped sharply, but the ratio of trade finance over trade was stable and in some cases increased during the crisis period. Secondly, using quarterly data on listed firms in Korea, we conduct panel estimations to test whether firms that are more dependent on external finance experienced greater export contraction during the crisis. Our regression analysis suggests that the financial vulnerability of firms, measured by various financial ratios, did not contribute to export contraction during the financial crisis. This observation largely applies even to smaller firms, who are usually thought of as being more vulnerable financially. However, we find that small exporters that relied heavily on cross-border trade payables or receivables suffered larger drops in export growth during the crisis.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.9
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• pp.261-272
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• 2021

Rapid economic growth in recent years has caused a surge in energy consumption among Southeast Asian countries and laid a considerable burden on the already inadequate power infrastructure. As a result, frequent blackouts and prolonged outages have become common and weakened firm productive performance in those years. The main objective of this study is to examine the impact of power infrastructure quality on the performance of Southeast Asian manufacturing firms. In this study, the World Bank Enterprise Surveys was employed as the training dataset of 4723 manufacturing firms in the period of 2015-2016. The results of this study reveal that industrial firms that suffered from power outages had consistently lower productivity. As measured by the length of such events, more severe outages tend to be more harmful to the firm. Furthermore, the findings also indicated that most firms relied on self-generated electricity to reduce the negative impact of power outages, but this does not bring many benefits when operating at a small scale in some countries. Consequently, this study contributes to a growing literature that examines the economic impact of public infrastructure and how detrimental the poor state of such services is to a firm's downstream operations, productivity, and growth.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.3
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• pp.251-265
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• 2021

It seems a common sense that corporate social responsibility (CSR) is a key driver to attain business sustainability. Nevertheless, there has been little research on the performance of socially responsible activities, including economic and environmental responsibility activities in internationally diversified firms. The purpose of this study was to evaluate the effects of CSR activities on management performance. For this evaluation, an empirical analysis was conducted with a total of 2,520 cases, selected from companies listed on the Korea Composite Stock Price Index market for six years from 2013 to 2018. As proxies for management performance, financial date such as a total asset net profit ratio and a total asset-operating ratio were used. A multivariate regression analysis was conducted to test hypotheses. The results of this analysis indicated that firms in the CSR outstanding group are significantly higher than other groups in management performances. In addition, CSR activities of internationally diversified firms positively influence their total asset net profit ratio and total asset-operating ratio. The results suggested that CSR activities of these firms can play a significant role in enhancing management performances amid the economic status of Korea, where a degree of export dependency is high.

• Asia-Pacific Journal of Business
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• v.13 no.1
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• pp.75-88
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• 2022

Purpose - This study investigates the effects of going public on the innovation of KOSDAQ firms. Design/methodology/approach - This study uses firms that go public from 2007 to 2011 in Korea. We compare a firm's innovation performance over five years before and after IPO. Findings - We find that firm's innovation declines after an IPO. After going public, both the quality and the quantity of patents are decreased. However, this decrease is alleviated in high-tech industries or concentrated industries where innovation is expected to be more valuable. When comparing firms with venture capital(VC), which are more likely to window dress, to firms without VC, VC backing has no meaningful impact on changes of innovation. Research implications or Originality - As the KOSDAQ market was established to provide small and medium enterprises(SMEs) with funds for firm's investments and growth, it is necessary to verify whether the capital raised at the IPO encourages innovation. Thus, our study contributes to the literature by examining empirically whether an IPO boosts a firm's innovation.