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Reforming the large business groups to promote productivity and inclusion in Korea

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  • Randall S. Jones

Abstract

Large business groups, which played a key role in Korea's economic development, are still dominant today, especially in exporting. The concentration of economic power creates a number of problems and risks. Ensuring a level-playing field between the business groups, also called chaebols, and SMEs and start-ups is essential to promote innovation and inclusive growth. While the business groups have long been subject to a number of special regulations, a comprehensive strategy is needed. The top priority is to improve corporate governance by strengthening the role of outside directors and protecting minority shareholders. A greater say for institutional investors and more active use of private remedies, such as class action suits, would also be beneficial. In addition, strengthening competition by reducing barriers to trade and FDI and activating a market for corporate control would lead to better performance by the groups. The ownership structure of the groups needs to be improved, notably by phasing out circular shareholding among their affiliates. This Working Paper relates to the 2018 OECD Economic Survey of Korea (www.oecd.org/eco/surveys/economic-survey-korea.htm)

Suggested Citation

  • Randall S. Jones, 2018. "Reforming the large business groups to promote productivity and inclusion in Korea," OECD Economics Department Working Papers 1509, OECD Publishing.
    • Handle: RePEc:oec:ecoaaa:1509-en
    DOI: 10.1787/9e9052b5-en
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    Cited by:

    1. Granda, María L., 2021. "Tax haven ownership and business groups: Tax avoidance incentives in Ecuadorian firms," Journal of Business Research, Elsevier, vol. 130(C), pages 698-708.

    More about this item

    Keywords

    chaebols; class action suits; corporate governance; cross shareholding; diversification; inside ownership; Korea Fair Trade Commission (KFTC); large business groups; minority shareholders; outside directors; ownership structure; subcontractors;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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