This study analyzes the functions of Korean conglomerates based on their affiliations through mergers and acquisitions. Affiliations in a business group are events where the affiliated firms are connected to the interactive functions among firms in a business group, and therefore provide an opportunity to investigate the functions of business groups. We find that the average cumulative abnormal return (CAR) of existing affiliated firms around the affiliation event is significantly positive and that the positivity of the average CAR of newly affiliated firms is also significant. This suggests that there had been “synergy” after the affiliation events. We also find that the average CAR of existing firms tends to be higher as the complementarity of mismatch of growth opportunities and resources between existing firms is higher. This results support the financial synergy hypothesis. We also find that the average CAR of existing affiliated firms tends to be lower with the higher controlling shareholder’s ownership. This result supports the propping hypothesis from existing affiliated firms to newly affiliated firms. In conclusion, these results suggest that Korean business groups perform the positive function of synergy, and the function of propping.