Korean IT service firms saw mixed financial effects after large-firm restrictions

What the study found: Small and medium-sized IT service firms in Korea showed positive total assets and sales in the three years after the restriction on large-firm participation, but operating profit and net profit were negative. The negative effects were more pronounced for medium-sized firms.
Why the authors say this matters: The authors conclude that the reduction effect on medium and small IT service firms differs from the first legislative purpose of the restriction system, and they suggest the policy should be revised.
What the researchers tested: The study examined financial performance before and after the January 2013 restriction on participation in public informatization projects by firms with cross-shareholding restrictions in the Republic of Korea. It used a sample of 121 small and medium-sized IT service firms, divided them into three groups, and analyzed the data with t-tests and one-way ANOVA.
What worked and what didn't: After the restriction period, total assets and sales remained positive for the firms studied. However, operating profit and net profit were negative, and the negative effects were especially strong for medium-sized firms.
What to keep in mind: The abstract does not describe additional limitations beyond the sample size, time window, and the financial measures analyzed. The findings are limited to the 121 Korean small and medium-sized IT service firms in the study.

Key points

• The study found positive total assets and sales after the restriction period.
• Operating profit and net profit were negative in the three years after the restriction.
• Negative effects were more pronounced for medium-sized IT service firms.
• The analysis used 121 Korean small and medium-sized IT service firms.
• The authors suggest the policy should be revised.