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2008, Vol.17, No.2

  • 1.

    The Impact of Business Regulation and Economic Freedom on Economic Growth

    이병기 | 2008, 17(2) | pp.3~25 | number of Cited : 12
    Abstract PDF
    This paper studies questions regarding the effect of economic freedom and business regulation on economic growth. A model is constructed with business regulations or economic freedom as a critical factor for economic growth, to estimate their effect on economic growth. The results indicate that economic freedom and government regulation of business is an important determinant of economic growth. Estimated coefficients of business regulation are negative with the growth rate of per capita GDP, statistically significant at 5% significance level. Greater economic freedom means higher growth rate of the economy measured by per capita GDP. The results are obtained by controlling initial per capita GDP, enrollment rate of secondary and primary schools, investment ratio, governmental consumption rate, law & order index, dummy variables across regions of the world. Tightened business regulations constrain economic growth while economic freedom contributes to economic growth, according to empirical analysis. This implies that increasing economic freedom or more active measure of eliminating economic regulations affecting companies makes it possible to promote economic growth. In terms of business regulations, the World Bank reports indicate that Korea should place emphasis on starting a business, labor regulations and administrative regulations in tax payments. By improving these conditions for doing business, economic growth is expected to accelerate.
  • 2.

    Entry Regulation, Investment and Economic Growth

    Jong-Ho Kim | 2008, 17(2) | pp.27~46 | number of Cited : 9
    Abstract PDF
    This study examines relationship between entry regulation, investment and economic growth. Using objective measures of entry regulation such as startup procedure, cost, duration, and minimum capital requirement, we find that only startup cost has negative impact on long-run growth. Moreover, the effect of startup cost on invest which, in turn, influences long-run growth turns out to be significant. This implies that regulatory reform on market entry should focus more on reducing startup cost and the effect of regulatory reform through the investment channel should be considered in analyzing the effect of regulatory reform.
  • 3.

    A Study on the Agency Costs of Holding Companies and Big Business Groups

    이원흠 | 2008, 17(2) | pp.47~81 | number of Cited : 13
    Abstract PDF
    We examine the effects of the corporate governance regulations by estimating the size of the agency costs of the firm. To test the effects, first of all, we develop a firm valuation model under the assumptions of the existence of corporate taxes, bankruptcy costs, and agency costs. The model is an extension of M&M models (1958, 1961, 1963). The model shows that the intrinsic firm values are sum of the four components such as the value of assets-in-place, the value of intangible assets, the value of growth opportunities and the compounding effects of tax benefits, bankruptcy costs and agency costs on the firm value. And also the model naturally tells us that the after-tax weighted average cost of capital is determined by the four components such as the unlevered cost of capital, the expected tax-benefits, bankruptcy costs and agency costs on the cost of capital. The empirical results in this study can be summarized as follows. First, the agency costs of holding companies are about 9% less than non-holding companies. Second, the agency costs of big business groups are about 10% higher than non-business groups. In sum, the simplified ownership structure of holding companies helps to eliminate some agency problems, and, it contributes, in turn, to reduce the size of agency costs and then to increase the intrinsic values of holding companies.
  • 4.

    Cost-Savings in Mergers between Piano Manufactures

    Sang-Kwon Kim | 2008, 17(2) | pp.83~95 | number of Cited : 0
    Abstract PDF
    I estimated the expected cost-savings that might result from the merger of two piano manufacturers, Samick and YoungChang. This estimation was based upon duality between cost and production functions. The results showed that the cost-savings would amount to about 12.0∼14.3 billon won if the merger between Samick and YounChang were allowed.
  • 5.

    The Effect of Holding Company on the Performance and Value of Its Affiliations: An Empirical Analysis

    Kwak, Soo-hwan | Choi Suk Bong | 2008, 17(2) | pp.97~131 | number of Cited : 10
    Abstract PDF
    This paper examines the usefulness of introduction and transformation of holding company by empirically investigating its effect on affiliated firms' performance and value. The holding company serves as a key venue to make firms' strategic decisions as well as a mechanism to reform corporate governance, especially in Korea after 1997 financial crisis. With unique longitudinal databases on 233 Korean holding company affiliations during 1997-2007, we compare the changes of firm performance and value at the holding company affiliations level to examine to what extent the holding company and its ownership structure contribute to affiliates' performance and value. Our empirical results suggest that the transformation of the holding company and its ownership play an important role in increasing affiliated firms' performance and value. The findings of this research have significant relevance to firms' strategy and financial policy, particularly in Korea which are in the process of seeking good corporate governance model as well as building indigenous capabilities for competing in global market.
  • 6.

    A study on the Quality of the Regulatory Impact Analysis in Korea: Applying the General Evaluation Framework

    Tae-Yun Kim | 정재희 | 허가형 | 2008, 17(2) | pp.133~170 | number of Cited : 13
    Abstract PDF
    This study tries to assess the actual quality of the RIA in Korea The literature is limited to largely analytic methodology or institutional perspective of RIA but lacks the comprehensive and systemic perspective for the evaluation of actual RIA statements. By integrating the RIA guidelines of major RIA-advanced countries, such as UK, USA, and Canada and of OECD, this paper develops a logical framework for the evaluation of actual RIA statements. Based on such evaluation frameworks, available all RIA statements written by almost all ministries of the Korean government from April, 2001 to December, 2006 are analyzed. Main results are as follows. The general quality of the Korean RIA is too low and it has shown little room for improvement. In particular, “the necessity of government intervention” and “consultation” are relatively well described, while the core factors of RIA such as “justification for government involvement”, “applying the appropriate discount rate” and “compliance & enforcement” have not properly described nor analyzed. And “the identification and measurement of cost and benefit” has shown no progress in its analytic quality.
  • 7.

    A Cross-Country Study on the Relationship between Control of Corruption and Efficiency of Government Expenditure

    Jinyoung Hwang | Shik Heo | 이성원 | 2008, 17(2) | pp.171~194 | number of Cited : 6
    Abstract PDF
    Using cross-country data, this paper examines the relationship between control of corruption and efficiency of government expenditure. The control of corruption is represented by a plausible dimension of governance indicators, compiled by Kaufmann et al. (2005). In addition, the efficiency of government expenditure is measured by public sector efficiency based on the 4 policy areas, such as administration, infrastructure, education and stability, which is provided by Angelopoulos et al. (2008). Regression results generally suggest that a country's control of corruption is significantly and positively associated with the efficiency of government expenditure. Also, the control of corruption has a positive impact on the efficiency in the policy area of infrastructure, regardless of estimation methods and model specifications. However, the efficiency in the policy area of eduction does not affected by the control of corruption.