Does the transformation to holding company systems in K orean chaebol improve the valuation independence of affiliated firms’ cost of debt?

Research output: Contribution to journalArticle

Abstract

Family-owned conglomerates are prevalent in most Asian countries, in which excessive control rights of their majority shareholders infringe independent managements of their affiliated firms. Less than 50% of Korean chaebol conglomerates have transformed to holding company systems to ensure independent management of affiliated firms. Empirical analyses discovered that the cost of debts in the companies which have been transformed to holding company restricting the complicated equity investment among the affiliated firms of chaebol are evaluated independently. Results imply that the negative effect from the propping of internal capital can be reduced through the fundamental change in the corporate governance.

Original languageEnglish
Pages (from-to)447-457
Number of pages11
JournalCorporate Ownership and Control
Volume13
Issue number4Cont3
Publication statusPublished - 2016 Jan 1

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Chaebol
Cost of debt
Conglomerate
Equity
Propping
Korean chaebol
Control rights
Corporate governance
Shareholders
Asian countries

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting(all)

Cite this

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title = "Does the transformation to holding company systems in K orean chaebol improve the valuation independence of affiliated firms’ cost of debt?",
abstract = "Family-owned conglomerates are prevalent in most Asian countries, in which excessive control rights of their majority shareholders infringe independent managements of their affiliated firms. Less than 50{\%} of Korean chaebol conglomerates have transformed to holding company systems to ensure independent management of affiliated firms. Empirical analyses discovered that the cost of debts in the companies which have been transformed to holding company restricting the complicated equity investment among the affiliated firms of chaebol are evaluated independently. Results imply that the negative effect from the propping of internal capital can be reduced through the fundamental change in the corporate governance.",
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