What Constitutes Too-Big-To-Jail?

Abstract

This paper investigates judicial size premium, the judicial bias in favor of large economic organizations. The Korean judiciary is biased with regard to chaebols (large family business groups). Convicted chaebol-related defendants receive 9.9%p more jail-sentence suspension and 19 month shorter jail term than non-chaebol counterparts do. The leniency remains robust after controlling for the quality of defense attorneys and other sentencing factors. We hypothesize that this bias occurs because (1) the judiciary worries that strict sentences against chaebols may cause system risk; and (2) the court follows the civil law tradition of being generous to in-group transactions. The results support both hypotheses. The larger the chaebol, the larger the judicial bias. Controlling for the in-group transactions explains much of the bias. With great victories in the court, chaebol-related offenders defend their wrongdoings, arguing that illegal in-group transactions are for the interest of entire business group, not for their private gain.