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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
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    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.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Comparative Economics.

    Volume (Year): 39 (2011)
    Issue (Month): 4 ()
    Pages: 557-576

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    Handle: RePEc:eee:jcecon:v:39:y:2011:i:4:p:557-576

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    Web page: http://www.elsevier.com/locate/inca/622864

    Related research

    Keywords: Convergence-of-interest; Entrenchment; Information asymmetry; Insider ownership; Shareholding matrix;

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    Cited by:
    1. Georgeta Vintila & Stefan Cristian Gherghina, 2014. "Insider Ownership and the Value of the Bucharest Stock Exchange Listed Companies: Convergence-of-Interest or Entrenchment Effect?," International Journal of Economics and Financial Issues, Econjournals, vol. 4(1), pages 183-195.
    2. Bhaumik, Sumon Kumar & Selarka, Ekta, 2012. "Does ownership concentration improve M&A outcomes in emerging markets?," Journal of Corporate Finance, Elsevier, Elsevier, vol. 18(4), pages 717-726.

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