Selection or Tunneling? An Explanation for the Agency Problems in Chaebol Firms
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To investigate agency problems between controlling families and minority shareholders in Korean business groups (chaebols), this paper analyzes the impact of the ownership structure of chaebol bidders on merger decisions through an examination of merger announcement returns. First, we discover that merger announcement returns for chaebol bidders are lower compared to non-chaebol bidders. Additionally, we find a positive correlation between the cash flow rights of the controlling family and announcement returns, while the discrepancy between voting and cash flow rights shows a negative correlation with announcement returns. Further investigation into the relationship between firms’ value and cash flow rights yields evidence supporting the selection hypothesis rather than the tunneling hypothesis. Lastly, the merger announcement leads to a decrease in the overall value of the group. In conclusion, agency problems indeed exist within chaebol firms, and the sorting of firms into different positions emerges as a significant mechanism.
Abstract
To investigate agency problems between controlling families and minority shareholders in Korean business groups (chaebols), this paper analyzes the impact of the ownership structure of chaebol bidders on merger decisions through an examination of merger announcement returns. First, we discover that merger announcement returns for chaebol bidders are lower compared to non-chaebol bidders. Additionally, we find a positive correlation between the cash flow rights of the controlling family and announcement returns, while the discrepancy between voting and cash flow rights shows a negative correlation with announcement returns. Further investigation into the relationship between firms’ value and cash flow rights yields evidence supporting the selection hypothesis rather than the tunneling hypothesis. Lastly, the merger announcement leads to a decrease in the overall value of the group. In conclusion, agency problems indeed exist within chaebol firms, and the sorting of firms into different positions emerges as a significant mechanism.
참고문헌 (28)
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