Group control motive as a determinant of ownership structure in business conglomerates. Evidence from Korea's chaebols

In this paper, we attempt to make two major contributions to the literature that studies the ownership structure of business conglomerates. First, we introduce the concept of group control motive and empirically show that this motive greatly shapes the controlling-minority ownership structure. Using a two stage least squares (2SLS) framework, we show that controlling families hold greater direct shareholdings in firms that have greater contribution to group control, and alternatively show that firms in which the controlling families hold greater direct shareholdings are made to have greater contribution to group control. Second, we find that the level of disparity between voting and cash flow rights is significantly higher than the levels previously reported in the literature on Korean firms when we include non-public firms and adopt a control concept that is more flexible and closer to reality.