Resumen de Separation of cash flow and voting rights and firm performance in large family business groups in korea
Manuscript Type Empirical Research Question/Issue This study examines how separation of cash flow and voting rights influences performance of firms affiliated with large family business groups. Complementing the dominant view grounded in agency theory, we suggest that the separation of cash flow and voting rights has positive influence on firm performance in the context of large family business groups.
Research Findings/Insights Using the data from the large family business groups in Korea, or Chaebols, between 2003 and 2010, we found that the separation is positively associated with firm accounting performance, but not with market performance. We also found that the effect of the separation is moderated by analyst coverage, R&D expenditure, and sales share in the business group.
Theoretical/Academic Implications This study reveals that in the large family business groups, the context in which the separation most frequently occurs, the separation not only induces the controlling minority shareholders to pursue private benefits of control but also accompanies financing benefits from active use of the internal capital market. In addition, this study notes the importance of addressing the endogeneity in the analysis of the relation between ownership structure and performance.
Practitioner/Policy Implications This study offers insights to policy makers planning to enforce/revoke the regulation on the separation of cash flow and voting rights in the pursuit of corporate governance reform especially in countries with poor shareholder protection.
