This paper estimates the impact of criminal justice process, mainly the conviction of controlling shareholders, on the market value of entire business group as well as its subsidiary. The court conviction of controlling shareholders in Korean large business groups, chaebols, provides meaningful circumstances to estimate the value of controlling shareholders. Our main findings are as follows. First, the criminal justice process events relating to controlling shareholders generally do not have significant group level effects on the value of firms. Second, even in the case of imprisonment, we are not able to find significant group-wide and individual firm level effects. However, for individual firm level, we find some negative effects on the value of firms. For instance, prosecutors' raiding the company, which is generally the first media exposure for the crime, does not have a significant effect, but that event conditional on ex-post pre-trial detention does have a negative effect. Also, pretrial custody, controlling shareholders being jailed, at the early stage of criminal justice process, has a negative effect. Finally, the effect of conviction on affiliated firms within the same business group is heterogeneous. The portion of affiliated firms that receive a positive impact and a negative impact from having a controlling shareholder being sentenced guilty almost equivalent (43% versus 57%, respectively). Such decisions have a positive effect on affiliates where a controlling shareholder holds a large proportion of the shares and a positive effect at the firms with better corporate governance; however, they have a negative impact on affiliates thought to be more likely to grow at faster rates in the future. For this reason, sentencing of the controlling shareholder itself induces unintentional and coincidental value transference between the different affiliated firms in a given business group. There are winners and losers within the same business group
