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Tunneling by Related†party Transactions: Evidence from Korean Conglomerates

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  • Sungbin Cho
  • Kyung†Mook Lim

Abstract

This study analyzes tunneling created by related†party transactions (RPT) in relation to controlling shareholders' cash†flow rights. Results of the analysis confirm a statistically significant relation between cash†flow rights and the earning rates of major controlling shareholders, indicating a transfer of wealth through RPT among affiliates of business groups. Furthermore, it is found that more sales made through RPT out of the total sales result in a higher earning rate, which implies that RPT affect the differences in earning rates among affiliates.

Suggested Citation

  • Sungbin Cho & Kyung†Mook Lim, 2018. "Tunneling by Related†party Transactions: Evidence from Korean Conglomerates," Asian Economic Journal, East Asian Economic Association, vol. 32(2), pages 147-164, June.
    • Handle: RePEc:bla:asiaec:v:32:y:2018:i:2:p:147-164
    DOI: 10.1111/asej.12146
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    2. Agnihotri, Arpita & Bhattacharya, Saurabh, 2019. "Internationalization, related party transactions, and firm ownership structure: Empirical evidence from an emerging market," Research in International Business and Finance, Elsevier, vol. 48(C), pages 340-352.

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