• The Journal of Industrial Distribution & Business
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• v.9 no.7
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• pp.53-59
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• 2018

Purpose - This study examines the effect of control-ownership wedge on stock crash risk. In Korea, controlling shareholders have exclusive control rights compared to their cash flow rights. With increasing disparity, controlling shareholders abuse their power and extract private benefits at the expense of the minority shareholders. Managers who are controlling shareholders of the companies tend not to disclose critical information that would prevent them from pursuing private interests. They accumulate negative information in the firm. When the accumulated bad news crosses a tipping point, it will be suddenly released to the market at once, resulting in an abrupt decline in stock prices. We predict that stock price crash likelihood due to information opaqueness increases as the wedge increases. Research design, data, and methodology - 831 KOSPI-listed firm-year observations are from KisValue database from 2005 to 2011. Control-ownership wedge is measured as the ratio (UCO -UCF)/UCO where UCF(UCO) is the ultimate cash-flow(control) rights of the largest controlling shareholder. Dependent variable CRASH is a dummy variable that equals one if the firm has at least 1 crash week during a year, and zero otherwise. Logistic regression is used to examine the relationship between control-ownership wedge and stock price crash risk. Results - Using a sample of KOSPI-listed firms in KisValue database for the period 2005-2011, we find that stock price crash risk increases as the disparity increases. Specifically, we find that the coefficient of WEDGE is significantly positive, supporting our prediction. The result implies that as controlling shareholders' ownership increases, controlling shareholders tend to withhold bad news. Conclusions - Our results show that agency problems arising from the divergence between control rights and cash flow rights increase the opaqueness of accounting information. Eventually, the accumulated bad news is released all at once, leading to stock price crashes. It could be seen that companies with high control-ownership wedge are likely to experience future stock price crashes. Our study is related to a broader literature that examined the effect of the control-ownership wedge on stock markets. Our findings suggest that the disparity is a meaningful predictor for future stock price crash risk. The results are expected to provide useful implications for firms, regulators, and investors.

• International Commerce and Information Review
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• v.19 no.1
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• pp.257-278
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• 2017

The paper examines the ownership structure and the firm value of online firms in the world. Data are gathered by using FACTIVA database for firms in the Dow Jones index for the 2014 fiscal year. The Ordinary Least Squares regressions, the Generalized Linear Model, and the model selection criteria are employed to analyze the relationship between the dependent and the independent variables. The paper tests theories such as the convergence of interest theory, the managerial entrenchment theory, and the eclectic theory. The paper finds that the ownership structure has an influence on the firm value depending on the rank of the large shareholders. While the first large shareholders have a negative association with the firm value, the presence of the second and the third large shareholders have a positive influence on the firm value. The paper also finds that the identity of the largest shareholders whether they are insiders or outsiders have an influence on the firm value. The proportion of shareholding by a large shareholder and her identity are variables which predict a firm value.

• The Journal of Fisheries Business Administration
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• v.33 no.2
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• pp.99-125
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• 2002

Fisheries cooperative requires dual characteristics in performing its original function. Economic characteristic as an business enterprise and democratic characteristic as cooperative entity need to complete its objectives and survive in the complex rapidly-changing environment. After IMF crisis, fisheries cooperative received enormous government's financial support and credit-business department is perfectly under government's control. Regional fisheries cooperative also faces business failure, therefore pure cooperative movement can't save the fisheries cooperative. Economic characteristic as an business enterprise is more emphasized than democratic characteristic as cooperative entity in recent years. The theory of corporate ownership and governance can be applied to explain the ownership and governance of fisheries cooperative because fisheries cooperative is now similar to an business enterprise. During the IMF crisis the board, the auditors and the minority shareholders in business enterprise were revealed to be powerless against the mighty influence of controlling shareholders. Unconstrained discretion exercised by those controlling shareholders not only led to the firms'insolvency, but also brought down the country's financial system. During the past few years, Korea has experienced many institutional changes regarding its corporate governance structure. The introduction of outside directors, the strengthening of minority shareholders' rights, and enhanced accounting transparency are achieved to improve the efficiency of economic system. Investors, including institutional and individual, also seem to be more aware of governance issues now. Credit-business department of fisheries cooperative is recommended to introduce the institutions same as the case of the corporate governance structure. Fisheries cooperative except economic and credit-business department requires other prescriptions because it is emphasized as democratic cooperative entity. But we should be careful to interpret the ownership and governance structure because they are products of nations, eras and organizations.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.16 no.9
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• pp.5829-5835
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• 2015

This paper investigates the impact of corporate governance structure on the firm's debt costs under different governance environments. We find that after the 2008 banking crisis, family firms with controlling shareholders benefit from lower debt cost through the strong control rights of dominating large shareholders, compared with the firms with diversified minority-shareholders. Foreign investors are related statistically to the higher cost of debt. Before the 2008 banking crisis, cash flows and growth potentials are positively associated with the firm's cost of debt.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.14 no.1
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• pp.143-147
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• 2013

This paper examines the impact of corporate governance structure on the cost of debt. Total sample is divided into the small sample, the medium sample and the large sample of equity concentration, based on the equity ownership of large shareholders. Our regression results show that foreign investors are not associated with the cost of debt in the small and medium samples of equity ownership, whereas foreign investors are significantly associated with the reduction in the cost of debt in the large sample of equity concentration. Academic implications of our findings are that as the ownership of dominating shareholders rises, they seek their private interests of perks causing an increase in agency costs and a decrease in firm's economic value, thus expanding borrowing costs. Practical business implications are that foreign investors may alleviate agency problem of dominating large shareholders in the firm through monitoring activities, thus enhancing the efficiency of business decision-makings.

• Asia-Pacific Journal of Business
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• v.11 no.4
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• pp.205-224
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• 2020

Purpose - This study aimed to identify the effects of ownership structures on agency costs in internationally diversified firms listed on the KOSDAQ market. Design/methodology/approach - A total of 5,824 samples were finally selected and empirically analyzed for a total of nine years from 2011 to 2019, during which the International Accounting Standards had been mandatory for firms listed on the KOSDAQ market. Findings - The results of this study showed that the effects of ownership structures on the ratio of asset turnover are positive for the major share and foreign equity ratios of international diversified firms. Moreover, by selecting the ratio of entertainment expenses as a proxy for agency expenses, this study confirmed that the effects of the ownership structure of an international diversified entity on entertainment expenditure were determined to show a significantly negative relation to entertainment expenditure, thus indicating that the higher the ratio of major shareholders, the more appropriately control the expenditure of entertainment expenses through arbitrary private deviations of the management.Furthermore, considering the effect of the ownership structure on the expenditure of sales and administrative expenses as a proxy variable for agency costs, this study verified that the majority share ratio of international diversified firms was negative to the expenditure of sales and administrative expenses, confirming that the higher the share of major shareholders, the lower the selling and administrative costs, but insignificant.Finally, as a result of determining whether the ownership structure of an international diversified firm affects the holding of free cash, the majority share of this firm shows a significantly negative relation to the ratio of the holding of surplus cash, indicating that the higher the proportion of major shareholders, the more appropriately control the holding of the entity's free cash through arbitrary private deviance by the manager. Research implications or Originality - Major shareholders of an internationally diversified firm listed on the KOSDAQ market play a positive role in the firm's performance by properly controlling agency costs that may be incurred by the management.

• The Journal of the Korea Contents Association
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• v.6 no.12
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• pp.244-252
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• 2006

The main results of this study can by summarized as follows. First, the incremental effect of equity to shareholders is common in the sample of this study. The sample contains 46 non-listed firms that filed for legal management and had confirmed their reorganization plans. Second, the results of the regression model analyzing the determinants of incremental equity to shareholders in legal management show that it is negative related to the solvency(total debt/total asset), firm size, and weight of claims for secured creditors and banks significantly. But corporate reorganization period(from filing to confirmation)are not significant.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.10 no.6
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• pp.1329-1336
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• 2009

This study analyzes the relationships between majority shareholders equity ratio or foreign equity ratio and corporate value within the entertainment industry. Furthermore, an analysis is conducted between majority shareholders equity ratio or foreign equity ratio and accounting index with the same industry. Both analyses are conducted after referring the records of the relationships between corporate governance and corporate value in general industries. The result of this study is summarized as follows. First, foreign equity ratio and corporate size are found to be the most important variables in explaining corporate value of entertainment enterprises. Second, corporations with majority shareholders holding higher percentages show a positive difference in CFO.

• Journal of Distribution Science
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• v.14 no.8
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• pp.51-57
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• 2016

Purpose - If control-ownership disparity is large, managers will not actively reduce costs; rather, they will maintain unutilized resources or possess surplus resources even when sales decrease with the purpose of increasing personal utility from status, power, compensation, and prestige. These managers' utility maximizing tendencies cause cost stickiness. We examine whether asymmetric behavior related to costs becomes stronger when there is a large disparity between ownership and control rights. Research design, data, and methodology - We construct a regression model to examine the relationship between control-ownership disparity and cost stickiness. STICKY, a dependent variable representing cost stickiness is a value found using the method of Weiss (2010), and Disparity is an interest variable that shows control-ownership disparity. Results - This study is based from the unique situations in Korea, in which high control-ownership disparity is common in firms. Large control-ownership disparity was found to increase cost stickiness of corporations. Conclusions - The results of this study imply that controlling shareholders may be regarded as a threat to the interests of minority shareholders and corporate values especially when controlling shareholders have significant influence over managers or the power to make managerial decisions as owners of a corporation.

• 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.