What Determines the Ownership Structure of Business Conglomerates?: On the Cash Flow Rights of Korea's Chaebol

58 Pages Posted: 23 Sep 2004

See all articles by Woochan Kim

Woochan Kim

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

Youngjae Lim

Korea Development Institute (KDI) - Corporate Affairs and Competition Policy Division

Taeyoon Sung

Yonsei University, School of Economics

Date Written: September 2004

Abstract

We examine a number of firm- and group-level factors that shape the ownership structure of business conglomerates, which can include both public and non-public firms. Using an exclusive set of 1997-2002 data on the intra-group shareholdings of 46 of Korea's largest conglomerates, or chaebols, we show that the contribution of individual firms to group control and profitability are important determinants of ownership structure in Korea's chaebol: the controlling shareholder's cash flow rights in a group-affiliated firm increases with the firm's contribution to group control and profitability. We also find that the level of disparity between voting and cash flow rights is significantly higher than the levels previously reported in the literature on Korean firms, which makes use of only public firms, indicating that non-public firms play a substantial role in increasing the disparity.

Keywords: ownership structure, business conglomerate, voting rights, cash flow rights, disparity, chaebols

JEL Classification: G32, G34

Suggested Citation

Kim, Woochan and Lim, Youngjae and Sung, Taeyoon, What Determines the Ownership Structure of Business Conglomerates?: On the Cash Flow Rights of Korea's Chaebol (September 2004). ECGI - Finance Working Paper No. 51/2004; KDI School of Pub Policy & Management Paper No. 04-20. Available at SSRN: https://ssrn.com/abstract=594741 or http://dx.doi.org/10.2139/ssrn.594741

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)

Youngjae Lim

Korea Development Institute (KDI) - Corporate Affairs and Competition Policy Division ( email )

P.O. Box 113
Cheongnyang
Seoul, 130-012
Korea

Taeyoon Sung (Contact Author)

Yonsei University, School of Economics ( email )

50 Yonsei-Ro
Seoul, 120-749
Korea, Republic of (South Korea)
+82-2-2123-5494 (Phone)

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