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Relationship between management ownership and firm value among the business group affiliated firms in Korea

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  • Ryu, Keunkwan
  • Yoo, Jihye

Abstract

In this paper, we revisit an old issue on the relation between management ownership and firm’s value. The Korean panel data on the business group firms, allows us to compute ownership right and control right separately for each business group affiliated firm. Our measures are different from the similar measures on the Korean firms as in Baek et al. (2004) or Joh (2003). Rather than confounding the two offsetting effects, this paper tests convergence of interest hypothesis and entrenchment hypothesis separately. Empirical findings show that, given control right, there is no clear-cut relation between firm value and the inside management ownership for most firms with the inside management ownership less than 42%, that there is a positive relation between firm value and the inside management ownership for those firms with the inside management ownership higher than 42%, and that, given ownership right, profitability decreases as control right increases.

Suggested Citation

  • Ryu, Keunkwan & Yoo, Jihye, 2011. "Relationship between management ownership and firm value among the business group affiliated firms in Korea," Journal of Comparative Economics, Elsevier, vol. 39(4), pages 557-576.
    • Handle: RePEc:eee:jcecon:v:39:y:2011:i:4:p:557-576
    DOI: 10.1016/j.jce.2011.05.002
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    Cited by:

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    2. Bhaumik, Sumon Kumar & Selarka, Ekta, 2012. "Does ownership concentration improve M&A outcomes in emerging markets?," Journal of Corporate Finance, Elsevier, vol. 18(4), pages 717-726.
    3. Loc Dong Truong & Thai Xuan Le & H. Swint Friday, 2022. "The Influence of Information Transparency and Disclosure on the Value of Listed Companies: Evidence from Vietnam," JRFM, MDPI, vol. 15(8), pages 1-14, August.
    4. Zhou, Mengling & Li, Kexin & Chen, Zhongfei, 2021. "Corporate governance quality and financial leverage: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 73(C).
    5. Bestari Dwi Handayani & Abdul Rohman & Anis Chariri & Imang Dapit Pamungkas, 2020. "Corporate Financial Performance on Corporate Governance Mechanism and Corporate Value - Evidence from Indonesia," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 16(3), pages 161-171.

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    More about this item

    Keywords

    Convergence-of-interest; Entrenchment; Information asymmetry; Insider ownership; Shareholding matrix;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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