Search Results (41)

This study investigates how board gender diversity affects firms’ long-term investment behavior in Korea, focusing on capital expenditures and R&D spending from 2011 to 2021. Using firm fixed-effects regressions and robustness tests with alternative measures of gender diversity, the results show that independent female directors are positively associated with long-term investment. However, this effect is significant only in non-Chaebol firms, where board independence is stronger, and gender diversity reflects genuine governance engagement. In Chaebol-affiliated firms, where female directors are often appointed to meet regulatory requirements, the relationship is insignificant, suggesting that diversity driven by formal compliance fails to enhance strategic decision-making. These findings highlight that the effectiveness of gender diversity depends on institutional authenticity rather than numerical representation. The study contributes to the corporate governance literature by showing how ownership structure and board independence condition the real impact of gender-diverse boards and offers policy implications for promoting substantive rather than symbolic diversity reforms. Full article

South Korea has become one of the most important economies in Asia. The largest Korean multinational firms are affiliated with influential family-owned business groups known as the chaebol. Despite the surging academic popularity of the chaebol, there is a considerable knowledge gap in the bibliometric analysis of business groups in Korea. In an attempt to fill this gap, the article aims to provide a systematic review of the chaebol and the role that business groups have played in the economy of Korea. Three distinct bibliometric networks are analyzed, namely the scientific collaboration network, bibliographic coupling network, and keyword co-occurrence network. Full article

Strategic mergers and acquisitions (M&A) can support sustainable business models by enabling firms to adapt their capabilities and competitive positions as conditions change. This study examines how target listing status (public vs. private) and acquirer size shape short-term shareholder wealth in Korean SMEs (Small- and medium-sized enterprise), and links announcement reactions to subsequent operating outcomes. Using an event study and multivariate regressions on 155 M&A announcements by KOSDAQ-listed SMEs (Korean Securities Dealers Automated Quotations) (2016–2020), we find that smaller acquirers earn significantly higher announcement-period cumulative abnormal returns (CAR)—i.e., smaller firm size is positively associated with superior market-adjusted performance around M&A events. Although acquisitions of privately held targets and diversifying deals show higher unadjusted means, their effects become statistically insignificant once firm fundamentals and size are controlled for. To connect M&A strategy with business-model sustainability, we operationalize sustainability as the alignment between short-term market expectations (CAR) and realized operating performance over 1–2 years, measured by return on operating cash flow (ROCF); medium-term checks indicate that the short-run “size effect” attenuates, underscoring the role of execution and scale in longer-run outcomes. Overall, the evidence highlights the primacy of firm-specific fundamentals, strategic fit, and integration capacity in guiding M&A decisions that advance both near-term performance and longer-term resilience. The Korean SME setting—marked by concentrated ownership, resource constraints, and a chaebol-influenced market and policy environment—provides a stringent context for these tests. Full article

Environmental, Social, and Governance (ESG) management has global relevance, yet its effects differ across contexts. In Korea, with concentrated ownership, family-controlled conglomerates, and evolving governance norms, the ESG–firm performance link offers unique insights. This study examines 620 publicly listed firms in Korea over the 2020–2022 period to assess the effects of ESG performance on firm value (Tobin’s q) and financial performance (operating return on assets). Three governance-related variables that reflect the distinctive features of Korea’s corporate governance—CEO (chief executive officer) tenure, the shareholding ratio of the largest shareholder, and foreign ownership ratio—are included in the analysis as moderating variables. Results show that ESG performance positively affects both firm value and financial performance. Also, CEO tenure and foreign ownership significantly strengthen the ESG–firm value relationship, whereas the shareholding ratio of the largest shareholder enhances the ESG–financial performance link. These findings extend stakeholder, legitimacy, and institutional theories to an East Asian context and offer practical guidance for managers and policymakers aiming to enhance corporate outcomes through ESG strategies in Korea’s distinctive governance environment. Full article

In the modern corporation, understanding sustainable cost management practices is essential for promoting economic resilience and resource efficiency. This study investigates how ownership structures influence the behavior of selling, and general and administrative (SG&A) costs during periods of sales fluctuations in South Korean firms, with particular attention to Chaebols. Drawing upon agency theory and corporate governance perspectives, we examine whether proxies for agency costs, namely, free cash flow, asset utilization ratios, and operating expense ratios, explain variations in SG&A cost responses to changes in revenue. Utilizing a panel dataset of 4279 firm-year observations from KOSPI-listed companies over the period 2011–2021, we employ Pooled Ordinary Least Squares (OLS), Fixed Effects, Random Effects, and Generalized Method of Moments (GMM) estimations to model SG&A cost behavior. The analysis incorporates regression-based interaction terms that capture asymmetric cost adjustments during sales declines, commonly referred to as cost stickiness. Our findings indicate that firms with concentrated ownership, such as Chaebols, exhibit significantly lower SG&A cost stickiness, reflecting stronger financial discipline and more efficient resource allocation. In contrast, firms with dispersed ownership demonstrate more pronounced cost stickiness, consistent with governance frictions and managerial discretion. These results emphasize the moderating role of ownership structure in cost behavior and highlight its implications for sustainable corporate governance. Our study contributes to the literature on cost management and financial sustainability by offering empirical insights from a distinctive institutional setting. Policy recommendations include enhancing internal controls, promoting transparent cost practices, and encouraging shareholder oversight to reinforce long-term efficiency. Full article

This study examines whether market competition reduces managerial slack under downward-sticky CEO pay schemes, thus mitigating the potentially negative link between downward-sticky pay and shareholder’s value. Using data on the Korean product market, which has been dominated by business conglomerates known as ‘chaebols’, we first find that downward-sticky pay is prevalent in underperforming firms and affects shareholder value negatively. Then, we find that a higher level of market competition alleviates the value-deteriorating effect of downward-sticky pay. Overall, the findings from our study imply that market competition as an external mechanism of corporate governance threatens still highly paid CEOs with worsening performance and motivates them implicitly to work harder. Together with a need for shareholders’ influence on downward-sticky pay, this study sheds light on the importance of market competition regimes in developing countries where legal protection for shareholders and internal governance structures are weak. Full article

This study investigates the interdependencies between debt capital and dividend policy as complementary factors influencing firm value among corporations listed on the Korea Composite Stock Price Index (KOSPI). Using Tobin’s Q as a firm value metric and employing robust econometric techniques (OLS, 2-SLS, and GMM), the analysis reveals that while debt and dividend policies independently reduce firm value, their interaction produces a synergistic effect that increases value. The findings further indicate the dual role of Chaebol ownership structures, which, despite their association with lower firm value, mitigate the negative effects of financial policies. Additionally, firm size is found to negatively impact value, whereas free cash flow has a significant positive effect. By disentangling the complex dynamics of capital structure, dividend strategies, and ownership configurations, this study offers actionable insights for managers, investors, and policymakers. It emphasizes the importance of balanced financial practices and governance reforms tailored to concentrated ownership environments. Full article

This study verifies investor perceptions of cash holdings in companies with ownership–control disparities in the Korean stock market. The value of the cash held by a company varies with the level of information asymmetry. A high level of information asymmetry suggests a strong possibility of the controlling shareholder using the company’s cash to obtain private utility and harming other shareholders’ interests. Hence, investors evaluate the value of the company’s cash negatively. Greater disparity between ownership and control indicates a higher level of information asymmetry and the likelihood of agency problems, resulting in capital market investors evaluating the cash held negatively. This study uses Faulkender and Wang’s model to examine the value of the cash held by applying it to large corporations belonging to large corporate groups and their affiliates from 2011 to 2019. The level of disparity between the ownership and control of the controlling shareholder showed a significant negative relationship with the value of the cash held by the company. This suggests that in the capital market, investors evaluate the companies with a high disparity of ownership and control as having a higher possibility of agency problems and operating cash less efficiently. Therefore, these companies are unlikely to be properly valued. Full article

This study examines the relationship between corporate governance (CG) and agency costs using Korean market data, particularly for chaebol firms. The final sample includes 660 firm-year observations between 2016 and 2020 for Korean non-financial firms listed on the Korean Composite Stock Price Index (KOSPI). This study employs an ordinary least-squares panel data regression model using two proxies for agency costs, namely, asset utilization ratio and operating expense ratio, and six CG individual metrics as independent variables (CG score, protection of shareholder rights, board structure, disclosure, audit organization, and managerial discretion and error management). We find that firms with high CG experience lower agency costs than those with low CG. Moreover, our evidence suggests that firms can decrease agency costs by improving the quality of CG. The results of our regression model also support the idea that CG is effective in reducing agency costs for chaebol firms but not for non-chaebol firms. Finally, our findings suggest that the implementation of effective CG mechanisms in firms might improve managerial behavior through better decision-making to maximize the value of firms. Full article

This study investigates the relationship between dividend policy, firm performance, and value within the Korean market, taking into account the unique context of Chaebol ownership structures. Utilizing a robust dataset of 5478 observations from the Korean Composite Stock Price Index, our empirical analysis employs advanced regression models, revealing distinctive effects of various dividend policy measures through the lenses of interest alignment and managerial entrenchment hypotheses. Surprisingly, while cash dividend payments exhibit a robust positive impact on Tobin’s Q and market-to-book ratios, suggesting an overall positive link with market valuations, a closer inspection reveals divergent impacts for Chaebol and non-Chaebol firms. In Chaebol entities, dividend policy proxies consistently demonstrate positive effects on performance metrics, aligning with the interest alignment hypothesis and highlighting strategic signaling efforts. Conversely, non-Chaebol firms exhibit intriguingly negative impacts, supporting the managerial entrenchment hypothesis and implying potential challenges to market value. Firms should prioritize transparent communication on dividend policies for improved investor decision making and enhanced corporate governance in the dynamic Korean market. Full article

Environmental, social, and corporate governance (ESG) has become essential for corporate sustainability. Among ESG activities, we focus on governance structure since firms can properly engage in activities related to environmental and social responsibility only when their corporate governance structures are well established. Outside directors play an important role in governance structure since they monitor the management and provide expertise to the board of directors. In this study, we pay particular attention to the compensation of outside directors, which reflects the effort, expertise, and independence of outside directors. Based on data from listed firms on the Korea Stock Exchange in South Korea between 2014 and 2020, we examine the association between outside directors’ compensation and ESG performance in certain firms with unique governance structures, namely, chaebols (or family firms). We find that the compensation of outside directors is positively associated with ESG performance, implying that outside directors’ compensation motivates effective monitoring and advisement of management and has an incremental effect on ESG performance. We suggest that the compensation of outside directors is one of the key factors that can significantly affect ESG performance. Therefore, investors and policymakers may evaluate whether a firm is doing well in terms of ESG activities by examining the compensation of outside directors. Full article

This study examined the effect of corporate governance on labor investment efficiency, using 5178 firm-year samples from companies listed on the Korean stock market over the period from 2011 to 2019. In addition, the relationship between corporate governance and labor investment efficiency according to whether the company belongs to a chaebol group was examined. Corporate governance was measured using KCGS’s corporate governance ratings. This study tried to verify whether labor investment inefficiency due to information asymmetry is improved by excellent corporate governance. The results show that in the case of the entire sample, the relationship between corporate governance and labor investment efficiency was significant in the positive (+) direction. That is, it is an empirical result indicating that a company with a sound governance structure is making effective labor investment. The samples were divided into overinvestment samples and underinvestment samples, and the relationship between corporate governance and labor investment efficiency was analyzed separately in the two samples. According to the results, the positive relationship between corporate governance and labor investment efficiency was significant only in the case of underinvestment samples. In addition, the positive relationship between corporate governance and labor investment efficiency was more statistically significant in the case of companies belonging to a chaebol group. This study provided implications for authorities, shareholders, and investors, etc., in that it suggests the role of corporate governance as a mechanism to alleviate the agency problem between managers and investors. Full article

Environmental, social, and governance (ESG) metrics are widely used to measure the firms’ social performance. In this regard, donation expenses are one of the outcomes for the firms’ effort to build, grow, and maintain the social value. However, firms may expense a trivial or minimum amount of donations, considering the corporate size, in order to disguise themselves as a “good company”. In this paper, exploiting 2010–2019 Korean Stock Exchange (KSE) market listed companies’ financials and ESG scores, we examine whether Chaebol firms with good governance “actually” spend more donation expenses. We predict and find that good governance does not actually lead to greater donation expenses among Chaebol firms, despite the positive relations between governance and donation expenses in general. Overall, our findings highlight that good Chaebol companies determined by ESG metrics may not be real charitable companies. Our findings provide counterevidence against the notion that firms with a higher ESG score are more likely to be charitable. Full article

Corporate social responsibility (CSR) encompasses activities through which a firm ultimately achieves sustainable management by improving the society and environment. Contrary to the general perception that CSR activities can improve only the enterprise value (EV), they can also be strategically deployed based on agency problems (situational factors). Specifically, by focusing on the nature of related party transactions that exhibit high tendencies to introduce agency problems, this study analyzes whether South Korean firms that engage in such transactions perform CSR activities more actively than those that do not. The empirical analysis reveals that firms that engage in related party transactions exhibit increased CSR activity scores, indicating that managers are more likely to deploy CSR activities as a tool for managing their image and concealing or embellishing illicit corporate transactions. Hence, CSR activities undertaken at the expense of shareholders may be opportunistically exploited as a tool for positively embellishing a firm’s image. However, it is observed that chaebol companies do not strategically exploit CSR activities, despite being engaged in related party transactions. Thus, chaebol companies that are registered with a large business group and under the supervision system of the government are unlikely to opportunistically exploit CSR activities. Full article

We examine the association between carbon emissions, carbon disclosures, and firm value for Korean firms, with a particular interest in chaebols, a special type of Korean conglomerate. Using hand-collected carbon emissions and firm-specific data for 841 Korean firms, including 514 chaebols and 335 non-chaebols, we find a significantly positive relationship between carbon emissions and firm value among chaebol affiliates. This result contrasts with previous findings conducted in advanced markets, where investors consider carbon emissions to be destructive. In terms of the voluntary disclosure policy, we find that companies with good environmental performance tend to disclose carbon emissions voluntarily. We further argue that these findings originate from the specific business atmosphere in Korea. Our results support the traditional view of corporations in terms of environmental policy and highlight the importance of firm characteristics and historical developments in the analysis of environmental policy. Full article