Family Control and Expropriation at Not‐For‐Profit Organizations: Evidence from Korean Private Universities

17 Pages Posted: 12 Jun 2012

See all articles by Kee-Hong Bae

Kee-Hong Bae

York University - Schulich School of Business

Seung‐Bo Kim

affiliation not provided to SSRN

Woochan Kim

Korea University Business School; European Corporate Governance Institute (ECGI); Asian Institute of Corporate Governance (AICG)

Date Written: July 2012

Abstract

Manuscript Type: Empirical. Research.

Question/Issue: We study an agency problem in private universities – the conflict between controlling families and other stakeholders. We investigate whether universities over which controlling families have disproportionately significant power relative to the amount of funds they contribute, that is, universities with high expropriation risk, are associated with lower outside donations and poor quality.

Research Findings/Insights: Using a sample of Korean private universities, we find that measures of family control in excess of monetary contributions are negatively related to the level of outside donation and measures of university quality. We also find that universities at which the controlling family exerts disproportionate control are more likely to face disputes between the controlling family and other stakeholders. Finally, we show that our results are not driven by reverse causality.

Theoretical/Academic Implications: While the existing literature on not‐for‐profit organizations focuses on the conflict between professional managers and other stakeholders, we study the conflict between controlling families and other stakeholders. We investigate a situation in which the controlling family expropriates other stakeholders, a topic missing from the existing not‐for‐profit literature.

Practitioner/Policy Implication: This study offers insights to policymakers interested in creating private universities in an emerging market setting. The relevance of our results is not limited to Korea. According to Altbach, family control of private universities is prevalent in a number of countries, including Mexico, Thailand, Taiwan, Japan, Korea, the Philippines, Argentina, India, and China.

Keywords: Corporate Governance, Non‐profits, Expropriation, Donations, Private University

Suggested Citation

Bae, Kee-Hong and Kim, Seung‐Bo and Kim, Woochan, Family Control and Expropriation at Not‐For‐Profit Organizations: Evidence from Korean Private Universities (July 2012). Corporate Governance: An International Review, Vol. 20, Issue 4, pp. 388-404, 2012. Available at SSRN: https://ssrn.com/abstract=2082760 or http://dx.doi.org/10.1111/j.1467-8683.2012.00922.x

Kee-Hong Bae (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
416-736-2100 ext) 20248 (Phone)
416-736-5687 (Fax)

Seung‐Bo Kim

affiliation not provided to SSRN

No Address Available

Woochan Kim

Korea University Business School ( email )

LG-POSCO Bldg #524
Anam-Dong, Seongbuk-Ku
Seoul, Seoul 136701
+822-3290-2816 (Phone)
+822-922-7220 (Fax)

HOME PAGE: http://biz.korea.ac.kr/professor/wckim

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Asian Institute of Corporate Governance (AICG) ( email )

1, 5-ga, Anam-dong
Sungbuk-gu
Seoul, 136-701
Korea, Republic of (South Korea)

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