• The Journal of Asian Finance, Economics and Business
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• v.7 no.1
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• pp.59-69
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• 2020

This study investigates the influence of individual blockholder on accounting quality. Prior studies investigating Korean blockholders' influence focus on the influence of controlling shareholders or institutional investors; however, they rarely examine individual blockholders' influence. This paper investigates how individual blockholders in Korean stock markets affect accounting quality of firms listed in Korean Stock Exchange. I analyze individual blockholders' influence on proxies of accounting quality using multivariate regression with hand-collected individual blockholder data. Korean law requires public firms to disclose the list of shareholders having no less than 5% of ownership. From the list of blockholders, individuals who have no explicit personal relation with controlling shareholders were classified as individual blockholders. My empirical results show that firms having individual blockholder(s) use more income-decreasing accruals than those having no individual blockholder. Furthermore, accounting information of firms having individual blockholders(s) is more conservative than that of firms having no individual blockholders. However, the presence of individual blockholder increases the tendency of loss avoidance and earnings management using overproduction and reduction of discretionary expenditure. This paper contributes to the literature by presenting the first evidence of the monitoring role of an individual blockholder on financial reporting of firms listed in the Korean stock markets.

• The Journal of Asian Finance, Economics and Business
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• v.8 no.3
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• pp.287-296
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• 2021

This paper investigates the relationship between the ownership of the largest family blockholders and corporate risk. We also examine whether firms that belong to 30 main Chaebol groups lower corporate risk. We use panel analysis for companies listed on the Korea Exchange from 2005 to 2017. We use beta, volatility, and idiosyncratic risk as a proxy for corporate risk. We employ both the ownership of the largest family blockholders and firms that belong to 30 main Chaebol groups as a major independent variable. The results show that the ownership of the largest family blockholders is associated with low beta. In terms of the effects of the ownership of the largest family blockholders on beta, we find that a firm that belongs to the 30 main Chaebol group reinforces the lower beta. These results suggest that the ownership of the largest family blockholders and firms that belongs to 30 main Chaebol groups may be associated with low systematic risk in the Korean stock market. Our findings can provide meaningful information to investors and field officers who are interested in the relationship between firm risk and both the largest family blockholders' ownership and firms that belong to 30 main Chaebol groups.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.11
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• pp.727-736
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• 2020

The purpose of this paper is to examine the relationship power distribution among several blockholders (contestability) and firm performance. We use a sample of 646 firms listed in the security markets of Korea from 2005 to 2007. Using different measures of contestability, we verify advance research literature by examining that, when power dispersion among several blockholders (contestability) increases, firm performance is enhanced. The results show that, when the possibility of a controlling coalition being formed among several blocks increases, the corporate value decreases. We also find that this relationship is even more significant in KOSDAQ. However, the smaller the competition of voting rights among blockholders, the higher the corporate performance in KOSPI. The reason for this seems to be that the two markets are different in terms of ownership and governance. This suggests that the effects of contestability among blockholders on firm performance depend on the type of the stock market. The results of this study expand the existing governance literature by analyzing the relationship between contestability among blockholders and firm performance in emerging markets such as Korea. Our findings contribute to policymakers and investors who are interested in the relationship between contestability of control and firm performance in the Korea stock market.

• The Korean Journal of Financial Management
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• v.11 no.1
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• pp.263-284
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• 1994

This study examines the monitoring effects of institutions, outside directors, and outside blockholders by seeing managers' selection of antitakeover measures. In this paper, we hypothesize that managers use antitakeover techniques to entrench themselves when they are not monitored closely. Consequently, we hypothesize that institutional ownership, outside membership on board of directors, outside directors ownership, and outside blockholder ownership are less in firms which adopt harmful antitakeover measures. This paper analyzes whether the degree of monitoring by institutions, outside directors, and outside blockholders influences managers' adoption of different types of takeover defenses. We find interesting empirical results. First, aggregate institutional ownership is positively correlated with the likelihood of antitakeover techniques adoption. This result implies that institutional investors are passive. Second, total and active blockholder owner-ship is higher at firms that do not propose any defensive tactics. passive blockholder owner-ship is highest at fair price firms but low at poison pills firms. Ownership concentration by outside investors increases monitoring and reduces agency problems. Thirid, outside board monitoring is ineffective.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.15 no.1
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• pp.129-136
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• 2014

This paper examines the effects of dominating large shareholders and foreign blockholders on credit ratings. An effective governance mechanism is expected to lead to higher credit ratings through its impact on default risk of the firm. Our results show that dominating large shareholders have an adverse impact on credit ratings of domestic firms on the level of its statistical significance. Foreign shareholders are positively associated with credit ratings, contributing to the higher credit worthness of domestic firms.

• Korean Business Review
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• v.18 no.1
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• pp.19-41
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• 2005

The informativeness of accounting earnings to investors may be used as a measure of the quality of accounting information. The ownership structure is considered to be related to both of two variables, the reliability of earnings reflecting the economic performance of the enterprise and the existence of alternative information sources. Earnings manipulation may mitigate the correlation between accounting earnings and the economic performance and alternative information sources decrease the value of accounting earnings as an information. Thus ownership structure could influence the informativeness of accounting earnings. This paper classifies ownership into three categories, management or inside ownership, institutional investors and large outside blockholders, and diffuse outside ownership and examines theoretically the difference of information effectiveness under each ownership structure. The earnings manipulation hypothesis supports the assertion that the separation of ownership from control motivates earnings manipulation. And differential information hypothesis suggests that more non-accounting information of firms with institutional or concentrated outside ownership is provided. Outside blockholders have alternative information sources that make accounting manipulation ineffective. While most previous studies have examined the effect of ownership on the informativeness of earnings from earnings manipulation hypothesis, this study is motivated by both earnings manipulation hypothesis and differential information hypothesis.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.4
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• pp.29-39
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• 2020

The purpose of this study is to investigate the determinants of blockholder presence in the Korean stock market. This study examines previous theories and studies, points that previous studies did not examine, and proposes two hypotheses. To verify two hypotheses, fundamental data were collected from firms listed on Korea Exchange from 2005 to 2017. As explanatory variables, we use the factors and characteristics of the firms used in the previous studies. Logistic regression analysis was conducted to test the determinants of blockholder presence. We find that firm size is the most distinctive factor determining the presence of blockholder, and firm idiosyncratic risk is the most similar factor determining the existence of each blockholder. Tobin Q shows significant value in family and government, and R&D intensity appears to be a negative related to the presence of blockholder in financial institutions. We also find that the determinant of blockholder presence differs from the mechanisms that govern each individual blockholder type when all blockholders grouped together. This suggests that there is blockholder heterogeneity within Korea listing firms. Our findings contribute to investors and policy makers who interested in the determinants of the presence of blockholder and blockhoder heterogeneity in Korea stock market.

• The Journal of the Korea Contents Association
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• v.12 no.3
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• pp.285-294
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• 2012

Under conditions of increasing environmental uncertainty, firms' risk management become important. This study examines the impact of foreign currency derivative usage on firm value using 3,004 Korean non-financial firms from 2002 to 2007. The results showed that there was no significant relationship between foreign currency derivative usage and firm value for the whole period and from 2002 to 2004 when exchange rate was relatively less volatile. But form 2005 to 2007 when exchange rate was volatile, foreign currency derivative usage gave significant negative impact on firm value, whereas when contract value was used, the relatinship was significantly positive. These results might be come from the characteristics of contract value and fair value of foreign currency derivatives. increased firm value when contract value was used as foreign currency derivative usage measure. But when fair value was used, there was no significance. For control variables, major shareholders ownership and foreign blockholders ownership was positively related with firm value.

• Journal of Industrial Convergence
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• v.19 no.5
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• pp.13-19
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• 2021

In this study, the relationship between R&D investment and firm value was approached from ESG's G(governance) perspective to verify the moderating effect of the corporate governance and ownership structure. To this end, a panel analysis was conducted on a total of 2,825 samples of 405 manufacturing companies listed on the KOSPI market during 2013~2020. The main analysis results are as follows. First of all, we found that R&D investment has a negative impact on firm value, at least in the short term, and that these relationships are moderated by corporate governance and ownership structure. When professional CEO with high level of expertise in business and management does lead R&D investment, the negative impact of R&D investment on firm value is mitigated compared to owner-manager. Also, the stronger the power of outside blockholders, the more transparent the management and disclosure of information, alleviating the information asymmetry between internal and external shareholders, which mitigates the negative impact of R&D investment on firm value. The findings suggest that the factors of ESG may not only have a direct impact on firm value, but also have a moderating effect on firm value.

• The Journal of the Korea Contents Association
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• v.22 no.4
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• pp.314-323
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• 2022

This study examines the effecs of National Pension Service blockholders on accounting conservatism. The sample consists of 10,117 non-banking firm-years listed in Korea Stock Exchange(KOSPI) during the period 2011 to 2018. The results of this study are as follows. First, it was found that companies in which the National Pension Service as a major shareholder hold more than 5% of the shares are less prone to conservative accounting treatment than those that do not. Second, such a negative relationship between investment by the National Pension Service and conservative accounting was consistently found even when the investment period of the National Pension Service was divided into short-term (less than 1 year) and long-term (more than 3 years). It is expected that the National Pension Service, the largest institutional investor in Korea, will be able to carry out meaningful management control activities on investment companies. As the monitoring function of the National Pension Service works effectively in the capital market, agency costs are reduced, and investors' demands for corporate conservative accounting have decreased.