The K-affiliation advantage: Do intragroup transactions enhance subsidiary creditworthiness by the halo effect?

초록

This study empirically examines how intragroup transactions (IGTs) affect the credit ratings of parent (PD) and subsidiary (SD) firms through two opposing mechanisms-the tunneling effect (Htunn) and the halo effect (Hhalo). The Korean Chaebol setting, in which parent and subsidiary firms are often cross-listed in the capital market, provides a unique environment enabling the simultaneous investigation of both entities' financial information. We construct a balanced panel of 360 parent-subsidiary (PD-SD) pair-year observations from Korean Chaebols and employ OLS and ordered logistic regressions including PD-SD interaction terms. To capture the actual net resource flow within business groups, we set Net Intragroup Sales (GRPT) as the core independent variable. Our analysis reveals that IGTs significantly improve subsidiary credit ratings (supporting Hhalo), whereas the tunneling hypothesis that parent firms extract resources from their subsidiaries (Ht(u)nn) is rejected. Furthermore, this positive relationship remains robust when substituting GRPT with the total transaction volume (INTRA). Additionally, a two-stage least squares (2SLS) instrumental variable analysis confirms the causal nature of the halo effect by effectively addressing potential endogeneity concerns. These findings suggest that within the Korean Chaebol structure, IGTs function primarily as a support mechanism, reinforcing subsidiary creditworthiness through the halo effect rather than to exploit the subsidiary. This study contributes to refining credit rating methodologies by providing empirical evidence for the systemic nature of the group affiliation advantage.

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