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The Chaebol’s Corporate Governance and the Crisis

In: Crisis and Restructuring in East Asia

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  • Seung-Il Jeong

Abstract

The chaebol have dominated the Korean economy. In particular, the five largest chaebol groups — Hyundai, Samsung, Daewoo, LG and SK — have symbolized the successful industrialization of the country. However, successive collapses of many large chaebol groups in 1997–9 raise the question of why they failed so suddenly and on such a large scale? The answer, according to the ‘finally collapsed’ view, is that failure was due to a significant weakness in the chaebol’s governance mechanism. Shareholder value literature has especially criticized the chaebol’s ownership and control structure for the low protection of minority shareholders and low transparency (see, e.g., Black et al. 2000; Jang 2001). Shareholder value advocates argue that the main cause of the 1997 crisis was a corporate sector crisis arising from a ‘distorted’ and ‘abnormal’ ownership and control structure, and that strengthening shareholder rights and corporate transparency is essential in order to enhance the efficiency of the Korean corporate — and economic — system (Kim K.-W. 1999; Jang 2001).

Suggested Citation

  • Seung-Il Jeong, 2004. "The Chaebol’s Corporate Governance and the Crisis," Palgrave Macmillan Books, in: Crisis and Restructuring in East Asia, chapter 4, pages 74-91, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-51098-2_4
    DOI: 10.1057/9780230510982_4
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