publication . Article . Other literature type . 2003

Corporate Governance and Firm Profitability: Evidence from Korea before the Economic Crisis

Sung Wook Joh; Sung Wook Joh;
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  • Published: 01 May 2003 Journal: CFA Digest, volume 33, pages 12-13 (issn: 0046-9777, eissn: 1938-3320, Copyright policy)
  • Publisher: CFA Institute
Abstract
Abstract This study examines how ownership structure and conflicts of interest among shareholders under a poor corporate governance system affected firm performance before the crisis. Using 5,829 Korean firms subject to outside auditing during 1993–1997, the paper finds that firms with low ownership concentration show low firm profitability, controlling for firm and industry characteristics. Controlling shareholders expropriated firm resources even when their ownership concentration was small. Firms with a high disparity between control rights and ownership rights showed low profitability. When a business group transferred resources from a subsidiary to another,...
Subjects
free text keywords: Strategy and Management, Economics and Econometrics, Accounting, Finance, Financial system, Corporate governance, Business, Profitability index, Audit, Shareholder, Corporate group, Inefficiency, Capital market, business.industry, Chaebol
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