The study analyses the independence, management rights, and private gains of chaebol-affiliated companies, using stock market indices to evaluate the performance of chaebol restructuring, and aims to define implications for scope and direction for future corporate reform drives. Reform of the chaebol governance structure in general is targeted at:
1) Enhancing the independence of affiliates by discouraging excessive business diversification and group-oriented business management
2) Improving the weak governance structure, which has allowed the controlling shareholders to abuses their power
The top 25 corporate groups based on their asset value (as per Fair Trade Commission’s survey in 1996) were selected and reviewed for a period between January 1996 to July 1997 (pre-restructuring), and between July 1998 and December 1999 (post-restructuring). Based on their daily stock prices, corporate indices related to governance structure—influence of group-wide risk and business performance on its price earnings ratio—were analyzed to determine their change before and after restructuring.
The study found that after corporate restructuring following the economic crisis, group-oriented business management has weakened in chaebol companies. Before the economic downturn, the price earnings ratios of chaebol affiliates were greatly affected by that of the group, but after restructuring, the influence of group performance has declined. In addition, as chaebol companies to expanded independently-managed businesses, the market now evaluates chaebol affiliates as having less risk associated with the group’s business performance.
However, as chaebol-affiliated companies ranked 6th or below now enjoy greater independence, independence of companies affiliated with top the 5 conglomerates has weakened. The correlation between group performance and individual affiliates’ performance was very high for conglomerates considered the 6th largest or below, and correlation declined significantly after restructuring. The top 5 conglomerates showed even higher correlation. This implies that restructuring has been less effective in the top 5 chaebol companies compared to the others.
For most chaebol companies, the level of private gain obtained through exclusive ownership of management rights is showing a weak downward trend compared to that of pre-restructuring, but the absolute level is still quite high. One of the reasons why common shares with voting rights are traded at higher prices than preferred shares without voting rights, but entitled to higher dividends, is due to the volume of private gain of the controlling major shareholder as well as his influence over the business management. The premium attached to voting rights (the price differential between common shares and preferred shares divided by preferred share prices) was estimated at 95 percent in 1996 and at 81 percent in 1999 indicating that the private gains obtained through dominating management rights are still significant. The premium for voting rights stands at 5.3 percent in the US, 6.5 percent in Sweden and 13.3 percent in the UK.
재벌의 기업지배구조 개선에 대한 분석(Analysis on reform of chaebol’s governance structure)
주식시장의 평가를 중심으로
서울 : 한국개발연구원
|Series Title; No||정책포럼|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Industry and Technology < Entrepreneurship|
|Holding||KDI; KDI School|