Abstract
In this study, a sample of group-affiliated public firms in Korea
was used to examine simultaneous causality between ownership structure
and performance. The results show that performance determines ownership
structure but not vice versa and provide strong evidence that controlling
shareholders use insider information to take direct and indirect
equity stakes in profitable or promising firms and transfer profits
to affiliates through intragroup trade. These findings highlight
the importance of further studying the ägency problems" that controlling
shareholders present for minority shareholders, especially in business
groups.
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