Asian Review of Financial Research

pISSN: 1229-0351
eISSN: 2713-6531

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Determinants of Internal Transactions among the Member firms of Korean Conglomerates ×
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Asian Review of Financial Research Vol.19 No.1 pp.77-118
Determinants of Internal Transactions among the Member firms of Korean Conglomerates
Hyung Cheol Kang1†
1 한국증권연구원 연구위원
Kyung Suh Park1†
1 고려대학교 경영대학 교수
Hasung Jang1†
1 고려대학교 경영대학 교수
Key Words : 채무보증; 부당내부거래; 기업집단(재벌); 피라미드; 소유구조; Tunneling; Propping

Abstract

The purpose of the paper is to understand the motivation of the internal transactions among the member firms of Korean conglomerates by investigating their determining factors. Using the transaction data for the periods of 1997 to 2003, we find that debt guarantees are mainly used for the purpose of propping financially weak member firms, while illegal internal transactions are mainly used for the purpose of tunneling corporate wealth from minority shareholders to controlling shareholders. The results suggest that controlling shareholders are willing to suffer financial loss in the short run to support their member firms. We also find that the pyramidal structures of conglomerate groups affect the decision on internal transactions.
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