기업집단의 분리를 통한 기업집단의 순기능과 역기능에 관한 연구

This study analyzes the functions of Korean conglomerates based on their spin-offs. Spin-offs in a business group are events where the interactive functions among affiliated firms are disconnected, and therefore provide an opportunity to investigate the positive or negative functions of business groups. We find that spin-off firms tend to be of smaller size and have lower stock ownership of other affiliates in a group. This result supports the control right hypothesis where controlling shareholders utilize affiliated firms to secure the control over their business groups. We also find that the average cumulative abnormal return (CAR) of the remaining firms around the spinoff event is significantly positive while the average CAR of the spinoff firms is negative. This suggests that there had been “propping” or “tunneling” from remaining firms to spin-off firms before the spin-off events. We also find that the average CAR of spin-off firms tends to be lower with the controlling shareholder’s ownership. This result supports the tunneling hypothesis from remaining firms to spin-off firms. We also find that the average CAR of remaining firms tends to be higher with lower profitability or longer firm years. This results support the propping hypothesis from remaining firms to spin-off firms. We also analyze the spinoffs of the business group under financial trouble and restructuring, which provides an opportunity to control for the endogeneity issues of spin-off events. We find that the average CAR of the remaining firms increases with their free cash flows and firm sizes. This result supports the propping hypothesis again. In conclusion, these results suggest that Korean business groups have performed both a negative function of “tunneling” and a positive function of providing internal capital markets and creating values for their member firms.