The transfer of resources from worse to better performing affiliated firms: A study of Korean chaebols

Beretz, Farid (2015) The transfer of resources from worse to better performing affiliated firms: A study of Korean chaebols.

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Abstract:In the past scientific articles confirmed tunneling in Korean chaebols. Diverse means have been utilized by chaebols to transfer resources between affiliates. In this study I provide further evidences of tunneling in chaebols. However, my study is different from the existing literature. The novel insight of my study is that I investigate whether chaebols siphon resources from firms that financially perform worse than those to which resources are transferred. For the time interval 2008-2010 I investigate 80 tunneling cases. For each of the cases I consider the pre-tunneling performance of the firm that is subject to tunneling, i.e. the firm which provides resources. And I consider the pre-tunneling performance of the firm which receives resources. In conjunction with previous studies, I consider EBIT (Earnings Before Interest and Tax) as a measurement for firm performance. I compute dEBIT as the EBIT of the provider less the EBIT of the receiver. Results of the analysis revealed that, if dEBIT is negative, chaebols tunnel more resources from the provider than, if the provider has a higher EBIT compared to the receiver. The results not only signal that worse performing firms can become subject to tunneling in chaebols, but that tunneling is more severe in cases in which the provider performs less well than its corresponding receiver. Hence, performance differences prior to tunneling are a consideration for the controlling shareholders of chaebols.
Item Type:Essay (Bachelor)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:International Business Administration BSc (50952)
Link to this item:http://purl.utwente.nl/essays/67311
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