A Survey of Research on the Corporate Governance of Korean Firms

Kim, Woochan; Kim, Woojin; Park, Kyung Suh

doi:10.2139/ssrn.3982236

Cited by 2 publications

(5 citation statements)

References 78 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The Korean market is also characterized by business groups and firms with family control, called chaebols (Hwang et al 2013;Kim et al 2021). In 2015, the combined sales of the top five chaebol firms contributed almost half of the total Korean Gross Domestic Product (GDP), similar to half of all Korean exports.…”

Section: Introductionmentioning

confidence: 99%

The Effect of Corporate Governance on the Degree of Agency Cost in the Korean Market

Lee,

Tulcanaza-Prieto

2024

Risks

View full text Add to dashboard Cite

This study examines the relationship between corporate governance (CG) and agency costs using Korean market data, particularly for chaebol firms. The final sample includes 660 firm-year observations between 2016 and 2020 for Korean non-financial firms listed on the Korean Composite Stock Price Index (KOSPI). This study employs an ordinary least-squares panel data regression model using two proxies for agency costs, namely, asset utilization ratio and operating expense ratio, and six CG individual metrics as independent variables (CG score, protection of shareholder rights, board structure, disclosure, audit organization, and managerial discretion and error management). We find that firms with high CG experience lower agency costs than those with low CG. Moreover, our evidence suggests that firms can decrease agency costs by improving the quality of CG. The results of our regression model also support the idea that CG is effective in reducing agency costs for chaebol firms but not for non-chaebol firms. Finally, our findings suggest that the implementation of effective CG mechanisms in firms might improve managerial behavior through better decision-making to maximize the value of firms.

show abstract

Section: Introductionmentioning

confidence: 99%

The Effect of Corporate Governance on the Degree of Agency Cost in the Korean Market

Lee,

Tulcanaza-Prieto

2024

Risks

View full text Add to dashboard Cite

show abstract

“…A special focus was placed on the role of boards of directors. Large listed firms were required to appoint 50% of outside directors and to have committees for audit and nomination of outside directors (Kim et al, 2022). Several reforms aimed to improve minority shareholder rights.…”

Section: The Legal Framework Corporate Governance and Chaebol Regulationmentioning

confidence: 99%

“…11 The early 2010s saw a new series of legal changes aiming at improving the corporate governance framework and reaching world standards. These reforms reinforced the role of boards of directors in strengthening the criteria for the selection of outside directors (Kim et al, 2022).…”

Section: The Legal Framework Corporate Governance and Chaebol Regulationmentioning

confidence: 99%

“…The protection of minority shareholders against tunneling through related party transactions within chaebols was reinforced. Hence, large related party transactions require approval from the board of directors and cannot benefit the controlling families (Kim et al, 2022).…”

Section: The Legal Framework Corporate Governance and Chaebol Regulationmentioning

confidence: 99%

“…First, business groups play a prominent role in the Korean economy. A second advantage is the data provided by the Korea Fair Trade Commission (KFTC) that eases the identification of business groups and their affiliates (Kim et al, 2022). Additionally, it provides a common definition of business groups to researchers ensuring the result comparability.…”

Section: Sample and Datamentioning

confidence: 99%

See 2 more Smart Citations

The Korean market and business groups: three essays on the pricing, valuation and policies of Korean listed firms

Ducret

View full text Add to dashboard Cite

This dissertation presents three essays on the Korean market and business groups. In Korea, large business groups called chaebols played and continue to play a prominent role in the economy. While the existing literature is primarily focused on the period of the 1997 Asian financial crisis, this dissertation analyzes the subsequent period. The beginning of the twenty-first century saw the rise of Korea as a global player and the emergence of Korean firms as leaders in several key industries. This dissertation explores research opportunities opened up by this recent evolution in three empirical studies. The first essay documents the “Korea discount”, which refers to the undervaluation of the Korean stock market. Despite practitioner interest, scholars did not address this topic. This article fills this literature gap and provides the first empirical evidence of this phenomenon. The Korea discount persists despite reforms aiming at reaching international standards. The study shows that the phenomenon affects both chaebol and non-chaebol firms. This observation suggests that chaebols are not the direct cause of the Korea discount contradicting a common belief. The second study exploits the revenue shock triggered by the COVID-19 pandemic to examining the value of business group affiliation during an economic downturn. The analysis reveals a switch in the value of affiliation as the crisis unfolded. The discount observed at the beginning of the crisis turned into a premium when the stock market started its recovery. Financial and governance risks appear as important drivers of variations in the value of affiliation. In addition to extend the growing COVID-19 literature, this study complements the literature on chaebol and crisis with a new empirical framework. The third essay examines the effect of affiliation on firm performance and firm policies. Overall, affiliation with a chaebol is associated with a higher firm value and a lower firm profitability. The results show that the intensity of the performance effect of affiliation depends on group characteristics such as size, diversification, and leverage. The analysis of corporate policies confirms the high level of control centralization of chaebols. Indeed, the results show that a number of chaebols conduct group-level strategies and apply homogeneous policies to their affiliates. This study contributes to the chaebol literature by documenting the association between affiliation and firm outcomes. The analysis makes also empirical and methodological contributions for business group literature by highlighting the relevance to account the heterogeneity between business groups in analysis of the affiliation effect.

show abstract

A Survey of Research on the Corporate Governance of Korean Firms

Cited by 2 publications

References 78 publications

The Effect of Corporate Governance on the Degree of Agency Cost in the Korean Market

The Effect of Corporate Governance on the Degree of Agency Cost in the Korean Market

The Korean market and business groups: three essays on the pricing, valuation and policies of Korean listed firms

Contact Info

Product

Resources

About