Regulatory Measures to Dismantle Pyramidal Business Groups: Evidence from the United States, Japan, Korea and Israel

40 Pages Posted: 3 Nov 2020

See all articles by Assaf Hamdani

Assaf Hamdani

Tel Aviv University; Buchman Faculty of Law; Coller School of Management; European Corporate Governance Institute (ECGI)

Konstantin Kosenko

Bank of Israel

Yishay Yafeh

Hebrew University of Jerusalem - Jerusalem School of Business Administration; European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2020

Abstract

Large business enterprises, from the railroad barons of nineteenth century America to Amazon and Google today, are often perceived as important for economic performance and, at the same time, as potential abusers of their political and economic power. In this study, we compare the experiences of four countries that implemented policies to curb the influence of one type of large corporate entities – pyramidal business groups: The US in the 1930s; Japan during the American occupation (1945-1952); Korea following the Asian crisis (late 1990s); and Israel in the last decade (2010-2018). Novel regulatory measures, applied consistently in the US and Japan, where the extreme political circumstances were very favorable to economic reform, led to the demise of pyramidal business groups in these countries. Israel, where the reforms did not follow a severe crisis, also used specifically-designed regulatory tools over a decade-long period, resulting in a significant decline in the number and size of business groups. Korea, after experimenting with variety of regulatory measures, chose to rely primarily on corporate governance-focused reforms to curb the influence of the chaebol, but with limited effects; groups continue to dominate the Korean economy. Our findings point to the importance of specifically-designed regulatory tools, applied consistently over time, against the backdrop of a pro-reform political climate.

Keywords: Business Groups, concentration of economic power, controlling shareholders, corporate governance, pyramids

JEL Classification: G38, K22, N20

Suggested Citation

Hamdani, Assaf and Kosenko, Konstantin and Yafeh, Yishay, Regulatory Measures to Dismantle Pyramidal Business Groups: Evidence from the United States, Japan, Korea and Israel (October 2020). CEPR Discussion Paper No. DP15342, Available at SSRN: https://ssrn.com/abstract=3723531

Assaf Hamdani (Contact Author)

Tel Aviv University; Buchman Faculty of Law; Coller School of Management ( email )

Ramat Aviv
Tel Aviv, 69978
Israel

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Konstantin Kosenko

Bank of Israel ( email )

Bank of Israel 1
P.O. Box 780
Jerusalem, 91907
Israel
972-26552628 (Phone)
972-26669628 (Fax)

Yishay Yafeh

Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )

Mount Scopus
Jerusalem 91905
Israel
+972 2 588 3081 (Phone)
+972 2 588 1341 (Fax)

HOME PAGE: http://bschool.huji.ac.il/facultye/yafeh/

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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