Group Control Motive as a Determinant of Ownership Structure in Business Conglomerates
49 Pages Posted: 22 Feb 2005
Date Written: January 2005
In this paper, we attempt to make two major contributions to the literature that studies the determinants of controlling-minority ownership structure (determinants-of-disparity studies). First, we introduce the concept of group control motive and empirically show that this motive greatly shapes the controlling-minority ownership structure. Specifically, we show that controlling families increase their direct shareholdings in firms that are more effective in bringing in additional cash flow rights or control over voting rights. Second, we 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 when we include non-public firms and adopt a control concept that is more flexible and closer to reality.
Keywords: ownership structure, business conglomerate, chaebol, voting rights, cash flow rights, disparity
JEL Classification: G32, G34
Suggested Citation: Suggested Citation