Ownership structure, expropriation, and performance of group-affiliated companies in Korea

In this study, a sample of group-affiliated public firms in Korea was used to examine simultaneous causality between ownership structure and performance. The results show that performance determines ownership structure but not vice versa and provide strong evidence that controlling shareholders use insider information to take direct and indirect equity stakes in profitable or promising firms and transfer profits to affiliates through intragroup trade. These findings highlight the importance of further studying the "agency problems" that controlling shareholders present for minority shareholders, especially in business groups.