• Asia-Pacific Journal of Business
• /
• v.12 no.1
• /
• pp.195-208
• /
• 2021

Purpose - The primary objective of this paper is to empirically examine whether the engagement of socially responsible activities in corporations affect the tendency of tax-avoidance by using the sample of Korean companies. We are particularly interested in Chaebol-affiliated firms, which are a special type of Korean conglomerates. Design/methodology/approach - This study is based on a sample of 5,496 firm-year observation data from 2011 to 2017 by using the ESG ratings from the Korea Corporate Governance Service(KCGS), a ESG rating agency in Korea. For our analysis, the firms were separated into 1,547 Chaebol-affiliated firms and other 3,949 firms. All financial and firm data were extracted from Fn-guide, which provides financial information for Korean listed firms. Findings - We find that CSR is generally positively related to the effective tax rate, which indicates a lower level of tax avoidance for more socially responsible firms. In particular, a positive relationship of social score with GAAP ETR was observed. Research implications or Originality - We find that the positive relationship is robust to the group of chaebol and non-chaebol affiliates unlike extant literature.

• The Korean Journal of Financial Management
• /
• v.26 no.2
• /
• pp.63-91
• /
• 2009

This paper tests the validity of pecking order theory by Myers(1977) and Myers and Majluf(1984) on Korean manufacturing firms listed in the KRX for the years of 1994 to 2003. We also want to see if there is any difference in financing behavior between chaebol affiliated firms and non-chaebol affiliated firms. We develop testable hypotheses from the idea that established relationship between bank and firm mitigates the problem of information asymmetry (Kang and Lim, 2001), and thus makes it easier for firms to raise funds through banks. The test result of the first stage shows that firms prefer cash reserves to debt financing, and prefer debt to equity. Chaebol affiliated firms are found to behave as if they already exploit internal capital markets. The second stage of the test carried out by dividing debt capital into bank loans and corporate bonds also shows a consistent pattern of financing behavior. Firms are testified to prefer cash to bank loans, bank loans to corporate bonds, and corporate bonds to equity. In this case chaebol affiliation seems to make firms behave as if they already establish internal capital markets. Further analysis shows that some, though not in every case, difference of ordering around the occasion of Korean financial crisis exists. It may be from the change of attitude of Korean firms to risk, or from weakened influence of internal capital market along with strengthened market power in the post-crisis period.

• Journal of the Korea Academia-Industrial cooperation Society
• /
• v.20 no.5
• /
• pp.352-362
• /
• 2019

The study investigates one of the long-standing, but still controversial issues in modern finance from the international and domestic perspectives. That is, financial components and differences on corporate profitability are identified and compared under the primary hypotheses. Empirical research settings include the sample data as KOSPI-listed chaebol firms, time reference covering the post-era of the global financial turmoil and two differently defined profitability indices measured by the market- and the book-value bases. A majority of total 7 explanatory variables except firm size and leverage ratio reveal their statistically significant power to explain profitability indices for the chaebol firms in the first hypothesis. The results are generally compatible with those obtained from their counterparts of non-chaebol firms. In the second hypothesis applying multinomial logistic model, the chaebol firms are classified into three groups according to the level of profitability. It is then confirmed that variables to represent the market-valued debt ratio, business risk and growth potential are financially discriminating factors among the three groups. The study may provide a new vision to identify financial factors of corporate profitability for Korean chaebol firms after the global financial crisis, which can enhance the benefits of interested parties at the government or corporate level in a virtuous cycle.

• Journal of Distribution Science
• /
• v.17 no.7
• /
• pp.55-63
• /
• 2019

Purpose - This paper examines the value relevance of socially responsible activities in the Korean retail firms. Recent studies predict positive relationships between socially responsible activities and the value of corporation. Research design, data, and methodology - We use the environmental score, social score, governance score and the sum of these three scores to represent a fim's effectiveness of socially responsible activities. These scores are published by the Korean Corporate Governance Service. This paper adopts a share price valuation model to evaluate the effect of socially responsible activities on a firm's share price, which controls for the book value of assets and current earnings. The ordinary least square method is employed to examine the relationship. The sample of Korea retail firms is examined from 2011 to 2016. We also conduct sub-sample analysis based on the categorization of chaebol affiliates and non-chaebol affiliates. Results - The entire sample analysis finds neither negatively nor positively significant relationship between socially responsible activities and the value of a corporation. In contrast, our examinations find a significantly positive valuation effect of social score within non-chaebol retail firms. Conclusions - The results weakly support the positive valuation effect of socially responsible activities. The results are consistent with recent studies that highlight heterogeneous effects of socially responsible activities on corporate policies and valuation.

• The Journal of Asian Finance, Economics and Business
• /
• v.8 no.5
• /
• pp.749-759
• /
• 2021

We investigate the relationship between ownership control disparity and future firm value in high-technology industries, and whether the effect of ownership control disparity on future firm value is differentiated when high-tech industry firms belong to chaebol groups. Using 11,848 firm-year observations of Korean firms listed on the stock market from 2006 to 2019, we employ univariate analysis and Heckman 2 stage analysis to test our hypotheses. We define high-technology industries as ICT industries based on the Korean Standard Industrial Classification. We measure future firm value using average Tobin's q for the next three years and ownership control disparity using the shareholding ratio of affiliated companies. Our univariate test results show that mean of Tobin's q is higher in ICT firms than non-ICT firms and firms largely owned by affiliates. In multivariate test, we find that the ICT firms with higher ownership control disparity are positively associated with future firm value. However, this association is lessened when firms belong to a chaebol group. Based on our findings, we suggest ownership control disparity has an additional positive effect on future firm in high-technology industries. The negative impact of chaebol groups on the association suggests the possibility of diversification discount in business group.

• The Journal of the Korea Contents Association
• /
• v.16 no.2
• /
• pp.729-739
• /
• 2016

The primary objective of implementing the study was to further investigate any pronounced financial components affecting the level of cash retention for the Korean chaebol firms. The research was framed to test for two hypotheses on the cash savings with utilizing the chaebol firms during the post-era of the global financial turmoil (from 2009 to 2013). In the first hypothesis test, any significant explanatory variables relative to the cash holdings, were identified in each corresponding category of the conditional quantile regression (CQR) model, while multilogistic regression analysis was performed to discriminate relevant financial factors in each pair of classes consisting of the chaebol firms. Concerning the results, liquidity, agency costs, and cash conversion cycle were found to be statistically significant in the majority of classified categories in the former test and liquidy, firm size, and dividend yield, also showed discriminating powers in each pair of categorical for the firms in the latter test.

• The Journal of the Korea Contents Association
• /
• v.15 no.7
• /
• pp.436-448
• /
• 2015

This study examined one of the contemporary financial aspects, the level of corporate cash holdings for the firms belonging to the chaebols in the Korean capital markets. Being accompanied by various alternative econometric methodologies such as static and dynamic panel data model, stepwise OLS, and Fama-Macbeth modelm this research extended the preceding Kim's study (2015) in anticipation of validating the results to identify any financial factors which may significantly affect the chaebol firms' cash reserves. Several financial characteristics such as CASHFLOW, MVBV, REINVEST, and AGENCY, were found to be statistically significant factors on the level corporate liquidity, along with CCC as cash conversion cycle in the models. It may be plausible that any outcomes of this study may be applied to enhance the efficiency of financial strategies of the chaebol firms on cash holdings, thereby expediting the development of the domestic capital markets status quo toward the advanced one in the market classification.

• The Journal of the Korea Contents Association
• /
• v.15 no.10
• /
• pp.504-516
• /
• 2015

This study addresses one of the curent issues in modern finance, which investigates financial profile on the levels of the chaebol firms' cash hoardings in the domestic capital market. Iit may be imperative to search for robust and consistent financial determinants of cash holdings as well as identifying any changes or trend of the determinants affecting the corporate cash reserves in the post-era of the global financial turmoil, considering that interest parties at the government and corporate levels, still seem to have a controversy or debate on excess cash savings. Two hypotheses were postulated and empirically tested for the chaebol firms in the study, such as any transitional changes of the relevant factors on cash holdings and unique attributes of financial factors discriminating between the different type of domestic stock markets.

• Journal of the Korean Operations Research and Management Science Society
• /
• v.38 no.2
• /
• pp.179-196
• /
• 2013

This paper examines the difference in compensation structure between family firms and non-family firms in Korea. A manager's compensation is an important means of motivating a manager to make decisions for shareholders by mitigating conflicts of interest between them. However, the role of a manager's compensation can be weakened in family firms for the following reasons. First, a family member manager has fewer conflicts of interest, compared to a non-family member manager. Second, a family member manager has an intrinsic incentive to increase a firm's value (i.e., family wealth). Finally, a family member manager can monitor non-family member managers more effectively. For the reasons, the agency problem will be less severe in family firms and subsequently the role of compensation will be reduced. The empirical results show that pay-performance sensitivity is smaller in family firms than in non-family firms. The main result is robust to variations such as changes in family ownership, the definition of a family firm, and control variables. Furthermore, this paper compares the pay-performance sensitivity of Chaebol family firms with that of other firms. The result shows that the sensitivity is higher for Chaebol family firms, compared to that in other family firms and non-family firms.

• Journal of Distribution Science
• /
• v.17 no.6
• /
• pp.33-42
• /
• 2019

Purpose - We investigate whether a firm's engagement in socially responsible activity affects the quality of financial reporting within the retail industry of Korean market. Recent studies argue that more socially responsible firms tend to show a better quality of financial reporting. Research design, data, and methodology - We use a variety of proxy variables related to the use of discretionary accruals and real activity manipulation to measure the quality of financial reporting. The total of environmental, social and governance score is used to represent the degree of socially responsible activity in the retail industry. We use regression models to examine whether more socially responsible firms show a higher quality of financial reporting. The sample of publicly traded Korea retail firms is analyzed from 2011 to 2016. Results - Our analysis finds supporting evidence for limited earning management via the use of discretionary accruals. We find, however, no significant relationship between the degree of social responsibility and the quality of financial reporting within chaebol affiliates unlike non-chaebol affiliates. Conclusions - Our results weakly support a better quality of financial reporting for more socially responsible firms. The results highlight the importance of firm characteristics in deciding the effect of socially responsible activity on corporate policies.