A Comparative Study on the Market for Corporate Control and the Rise of Shareholder Activism in Corporate Governance

This article will examine the role of the market for corporate control and shareholder activism for corporate governance in South Korea and the U.S. to find appropriate approaches to regulation of current shareholder activism in order to improve corporate governance in South Korea. Even though the possibility of success of hostile takeover bids has been low due to the circular share-holding structure in South Korea, in terms of improvement of corporate governance, there have been positive effects. This article will inspect whether shareholder activism can play the role of improving corporate governance in lieu of the weak market for corporate control in South Korea. To do so, this article will scrutinize theories on the role of the market for corporate control in terms of corporate governance. In addition, this article will analyze shareholder activism and cases that brought positive changes to corporate governance. This article will show that institutional investors are in a better position to improve corporate governance when taking collective action with other shareholders and that South Korea may need mandatory adoption of the Corporate Governance Code for listed companies and the Stewardship Code for institutional investors with a“comply or explain”approach.