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Asian Review of Financial Research, Vol., No..
pp.1020~1050
pp.1020~1050
Does the supply chain matter in the ownership structure? Evidence from Korean business groups
Jieun Im Business School, Seoul National University
Woojin Kim Business School, Seoul National University
This study investigates how the supply chain may affect inter-corporate ownership structure among member firms within the business group. Previous literature suggests that profitable firms are located at the top of the pyramidal structure directly owned by the controlling shareholders. However, profitability may be endogenously determined based on related party transactions. Specifically, suppliers within the business group may generate higher profits through exclusive sales contracts with member firms. Based on a sample of large business groups in Korea, I find that suppliers are more likely to be located in the upper part of the pyramid. This suggests that controlling shareholders¡¯ incentive to expropriate corporate opportunity may be an important factor in structuring business groups.
Jieun Im
Woojin Kim
This study investigates how the supply chain may affect inter-corporate ownership structure among member firms within the business group. Previous literature suggests that profitable firms are located at the top of the pyramidal structure directly owned by the controlling shareholders. However, profitability may be endogenously determined based on related party transactions. Specifically, suppliers within the business group may generate higher profits through exclusive sales contracts with member firms. Based on a sample of large business groups in Korea, I find that suppliers are more likely to be located in the upper part of the pyramid. This suggests that controlling shareholders¡¯ incentive to expropriate corporate opportunity may be an important factor in structuring business groups.
supply chain,ownership structure,pyramid,business groups