What Determines the Ownership Structure of Business Conglomerates? : On the Cash Flow Rights of Korea’s Chaebol
- What Determines the Ownership Structure of Business Conglomerates? : On the Cash Flow Rights of Korea’s Chaebol
- Kim, Woochan; Lim, Young-Jae
- ownership structure; business conglomerate; chaebol; voting rights; cash flow rights; disparity
- Issue Date
- Series/Report no.
- KDI Working Paper Series;04-20
- 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.
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