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http://dx.doi.org/10.14400/JDC.2014.12.10.121

The effects of becoming holding companies on corporate governance and business concentration  

Yoon, Ji Eui (Dept. of Management, Hankuk University of Foreign Studies)
Nam, Giseok (Dept. of Management, Hankuk University of Foreign Studies)
Kim, Duk Ho (Valueone Consulting)
Kim, Joongwha (Dept. of Management, Hankuk University of Foreign Studies)
Publication Information
Journal of Digital Convergence / v.12, no.10, 2014 , pp. 121-134 More about this Journal
Abstract
This study investigated the stock market reaction to the announcement of conversion to holding company and its influence on the market value and corporate governance before and after the event. Generally, it is known that the conversion to holding company strengthens corporate governance because of diversification effects. Accordingly, it is expected that holding companies have a significantly positive influence on the short and long term stock value and improve firm performance. The results are as follows. First, companies have significantly positive short-term abnormal returns for a day. It confirms the stock market reaction hypothesis. Second, it is found that corporate governance is improved in two ways, protection of stock holders' right and distribution of corporate income in the year after converting to holding companies. However, the degree of business concentration appears to be decreased but the result is statistically insignificant after the conversion. Third, there is no significant positive relation between market performance and both protection of stock holders' right and distribution of corporate income. Thus, the results do not adequately support the hypothesis between corporate transparency and market performance.
Keywords
Corporate governance; Holding company; Business concentration; Stock holders' right; Corporate transparency;
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