OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

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

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)


Keywords: chaebols, diversification, class action suits, ownership structure, large business groups, corporate governance, cross shareholding, Korea Fair Trade Commission (KFTC), subcontractors, minority shareholders, outside directors, inside ownership
JEL: L5: Industrial Organization / Regulation and Industrial Policy; L1: Industrial Organization / Market Structure, Firm Strategy, and Market Performance; L2: Industrial Organization / Firm Objectives, Organization, and Behavior; G34: Financial Economics / Corporate Finance and Governance / Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance; L4: Industrial Organization / Antitrust Issues and Policies
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