Industrial Concentration and Stock Market Returns

Ryu, Doo Won; Ryu, Doo Jin; Baek, Jae Seung

Korean Journal of Financial Studies 2014;43(4):657-678.
Published online September 30, 2014.

Doo Won Ryu, Doo Jin Ryu, Jae Seung Baek

산업집중도에 따른 주식수익률 차이는 존재하는가?

류두원, 류두진, 백재승

Abstract

This study examines how industrial concentration (i.e., market competition) affects stock market performance in the Korean financial market. Our empirical results are as follows. First, firms in more concentrated industries generally exhibit lower returns, however, this pattern is not clear. Second, by analyzing sub-samples that are classified according to the 2008 global financial crisis, we find that firms in more concentrated industries earn significantly lower returns especially during the after-crisis period. Third, an analysis based on sub-samples that are classified by the degree of industrial concentration indicates that the stock returns of firms in less concentrated industries have a significant and negative relationship with the degree of industrial concentration, however while the stock returns of firms in highly concentrated industries do not show any significant patterns. Fourth, in contrast with the findings in U.S. market, we find that Korean stock returns are positively related to size and negatively related to the book-to-market ratio.

Key Words: 산업구조,산업집중도,시장경쟁정도,시장구조,주식수익률,Industrial Concentration,Industry Structure,Market Competition,Market Structure,Stock Returns