The Roles of Corporate Governance in a Firm’s Conformity to Institutional Pressures: Corporate Restructuring by Korean Firms, 1995~2005

By examining corporate restructuring by Korean firms, this paper attempts to answer the following two questions: 1) despite their unsatisfactory performance consequences, why have firms actively pursued restructuring over the last decades?; and, more importantly, 2) why have some firms not followed restructuring whereas others have actively pursued it? Adopting the institutional perspective to answer the first question, this paper presents the finding that corporate restructuring is triggered, not only by the changes in economic and regulatory environments, but also by institutional pressures from the society and industry. In order to answer the second question, this paper argues that even under the same institutional pressures for restructuring, a firm’s conformity to the pressures differs by the various internal and external conditions of the firm. As such contingency factors, this paper presents the two governance mechanisms that are specific to Korea as well as to most emerging economies: 1) the origin of top managers (professional versus family) and 2) business group affiliation.