Edited by Hwa-Jin Kim
Chapter 11: The Market for Corporate Control in Korea
* Hwa-Jin Kim I. INTRODUCTION Korea may be qualified as one of the “inefficient controlling shareholder systems” under the taxonomy proposed by Professor Ronald Gilson.1 Recent research shows that the average of controlling family ownership for public firms in Korea was 29.51 percent, compared with controlling families’ cash-flow rights of 8.42 percent. In the case of Samsung Group, the largest Korean conglomerate, those numbers were 13.52 percent and 1.14 percent, respectively, for public firms in the group.2 The private benefit of control is also relatively high in Korea. The value of corporate control amounts to about 34 percent of firm market value in Korea, as compared to about 29 percent in Italy, 1 percent in Denmark, 9 percent in Germany, and 2 percent in the United States.3 The poor corporate governance practices of some large Korean firms are responsible for the still-continuing discussions on how to abolish the “Korea discount,” i.e., how to eliminate or reduce agency costs in the inefficient controlling shareholder system. One of the solutions to the problem may be the increasing exposure of corporate control to the (global) market. This requires Korea to facilitate corporate takeovers and promote the market for corporate control. As a matter of fact, contested mergers and acquisitions emerged in the business world of Korea in the mid-1990s and have since served as a popular * This chapter is a shortened version of Hwa-Jin Kim, The Case for Market for Corporate Control in Korea, 8 Journal of Korean Law 227 (2008). 1 See Ronald...
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