Business Groups and Tunneling: Evidence from Corporate Charitable Contributions by Korean Companies

Posted: 26 Jan 2016 Last revised: 16 Jan 2017

See all articles by Byungki Kim

Byungki Kim

College of Business, Korea Advanced Institute of Science and Technology (KAIST)

Jinhan Pae

Korea University Business School (KUBS)

Choong-Yuel Yoo

KAIST College of Business

Date Written: January 9, 2017

Abstract

This paper investigates whether corporate philanthropic decisions are associated with a firm’s listing status and business group affiliation. Analyzing a large sample of public and private firms in Korea, we find that (1) public firms make more charitable contributions than private firms and (2) business group-affiliated firms make more charitable contributions than non-affiliated firms. The results suggest that public firms, owing to greater public scrutiny, and business groups, owing to higher political costs, are encouraged to make more corporate charitable contributions. Further, we find that (3) greater corporate giving by public firms than private firms is more pronounced for business group-affiliated firms, compared with non-affiliated firms. The result is consistent with business groups’ strategic coordination of their affiliates’ philanthropic decisions to tunnel business group resources out to controlling shareholders who hold a larger portion of private affiliates than public affiliates.

Keywords: Listing status, Business group, Corporate giving, Tunneling, Public scrutiny

Suggested Citation

Kim, Byungki and Pae, Jinhan and Yoo, Choong-Yuel, Business Groups and Tunneling: Evidence from Corporate Charitable Contributions by Korean Companies (January 9, 2017). Journal of Business Ethics, Forthcoming, DOI: org/10.1007/s10551-016-3415-0. Available at SSRN: https://ssrn.com/abstract=2722238 or http://dx.doi.org/10.2139/ssrn.2722238

Byungki Kim

College of Business, Korea Advanced Institute of Science and Technology (KAIST) ( email )

85 Hoegiro, Dongdaemoon-gu
Seoul 02455
Korea, Republic of (South Korea)

Jinhan Pae

Korea University Business School (KUBS) ( email )

Anam-Dong, Seongbuk-Gu
Seoul 136-701, 136701
Korea

Choong-Yuel Yoo (Contact Author)

KAIST College of Business ( email )

85 Hoegiro, Dongdaemoon-gu
Seoul, 02455
Korea, Republic of (South Korea)

HOME PAGE: http://www.business.kaist.edu/faculty/cyoo

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