Abstract

We examine the relationship between the amount of shares held by Chaebol's other affiliated firms and affiliated firm's ownership-control disparity. To this end, the ownership-control disparity equations are estimated with the ownership-control disparity index and the voting right leverage index as dependent variables, using cross-sectional data on 78 affiliated firms in Chaebols in 2005. These Chaebols are controlled by the ceiling on the total amount of holding shares of other affiliated firms in Chaebol. The estimation results with the ownership-control disparity index indicate that the increase in the amount of shares held by Chaebol's other affiliated firms deepens the ownership-control disparity. And the amount of net assets and the amount of cash flow mitigate the owner-ship-control disparity. The estimation results of the voting right leverage index. We also find that the owner-ship-control disparity index is more elastic than the voting right leverage index with respect to the amount of shares held by Chaebol's other affiliated firms. Overall, these empirical findings suggest that the ceiling on the total amount of holding shares of other affiliated firms in Chaebol can contribute to the desirable corporate governance.