Kim, Hwa-Jin --- "The Market for Corporate Control in Korea" [2012] ELECD 877; in Kim, Hwa-Jin (ed), "Korean Business Law" (Edward Elgar Publishing, 2012)

Book Title: Korean Business Law

Editor(s): Kim, Hwa-Jin

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781781003398

Section: Chapter 11

Section Title: The Market for Corporate Control in Korea

Author(s): Kim, Hwa-Jin

Number of pages: 22

Extract:

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 busi-
ness world of Korea in the mid-1990s and have since served as a popular



* This chapter is a shortened version of ...