earticle

영어

This study investigated ownership/governance structure, financial behavior and performance of Korean conglomerates. Since the restriction on conglomerates` equity in subsidiaries was lifted, total equity of conglomerates and shareholdings of member firms have increased sharply. As a result, shareholdings of the founder and his family have reduced and they could control the entire group only with less than 10% equity. On the other hand, cross debt guarantee has been phased out thanks to the consistent government policy. This study also found that the more unrelated diversification, the lower profitability. Conglomerates but SK and Samsung were inefficient portfolios in that return on equity ranged from 1.7% to 4.7% which was much lower than opportunity costs of capital. Current ratios of 5 largest conglomerates were around 90%, which were also much lower than around 130% of major countries. Financial expenses to sales were around 6% which was 3 to 6 times of those of competitors, and thus a main cause reducing the competitive power of Korean firms. While return on total capital was 1.3% for SK, it ranged from -0.4% to 0.1% for other conglomerates, which was much lower than 3.5% for Japanese firms and 4.2% for Taiwanese firms. Accordingly, changes in goal of firm management and management paradigm of conglomerates are required. In particular, managerial power should be shifted from founders to boards of directors who represent shareholders. Various monitoring systems need also be introduced. And, profitability rather than expansion should be emphasized.