The Influence of Ownership Concentration on Sustainable Merger and Acquisition Performance: Navigating Principal Conflicts in the Korean Market

Abstract

This study examines the dynamics of owner behavior, agency costs, and M&A outcomes in the Korean market, aiming to explore how ownership concentration influences conflicts among principal groups and impacts M&A performance. Using empirical data from Korean M&A transactions, we analyze the effects of ownership concentration and cash payment preferences on firm value. Our findings indicate that while ownership concentration can reduce owner–manager conflicts, it heightens principal–principal conflicts, especially with moderate ownership, weak governance, or financial distress. Control-focused owners prefer cash payments, which can lower acquiring firm announcement returns under high ownership concentrations. Effective governance is crucial for fostering responsible decision-making and sustainable practices in M&As. This research underscores the importance of balanced ownership structures and robust governance mechanisms in mitigating agency conflicts and promoting sustainable M&A performance.