Corporate Governance and Growth in the Korean Chaebols: A Microeconomic Foundation for the 1997 Crisis
From the perspective of Penrose's theory of growth of the firms, this paper, first, interprets the rapid growth with diversification by the chaebols as exploitation of growth opportunities and available resources, given the rents associated with the domestic market protection and subsidized loans from the state-controlled banks. Second, taking chaebols as a variant of the controlling minority structure firm, the agency costs of the chaebols are analyzed in terms fo unfair expropriation of other minority shareholders and debt-holders like the banks. For this analysis, the paper examines ownership and finance structures, dividends payments and stock prices, and bnakruptcy cases in chaebols. The paper argues that the chagnes in the external economic conditions since the mid 1980s contributed to increasing costs, and reduced the benefits, of the chaebol type firms, as evidenced by their declining profitability and eventually the 1997 crisis.
|Date of creation:||May 1999|
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