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2010, Vol.19, No.1

  • 1.

    Theory and Practice on Management of Public Entities : An Approach of Transaction Cost Economics

    Oak Dong-Suk | 2010, 19(1) | pp.3~38 | number of Cited : 6
    Abstract PDF
    There are over 300 public entities with a separate legal identity and substantial autonomy from the central government in Korea. For several decades there have been fundamental conceptual arguments within the Korean profession on the proper management systems on the distributed public entities. This paper argues on the concept of transaction costs in order to understand the organisational map of public sector. It is argued to be reasonable to expect that, over the long run, transaction cost-minimizing forms of organization will come to dominate in the government and public sector. As a powerful means to minimize the transaction costs on managing public entities, performance contracting and performance agreements between the government and public entities should be used more widely in Korea.
  • 2.

    Market Studies in Advanced Countries and Their Implications on Korean Economy

    Kang-Oh Yi | Nahm, Jae Hyon | 2010, 19(1) | pp.39~68 | number of Cited : 2
    Abstract PDF
    It is Market studies (or market investigation or sector inquiry) that investigates and evaluates how a specific market/industry works. Several antitrust authorities in advanced countries actively and widely conduct its inquiry into a particular sector or market of the economy when there are some evidences indicating that competition may be restricted or distorted. Market study is one of the important antitrust authority tools and is quite complementary to antitrust enforcement. This paper studies how other advanced countries such as US, UK, and EC conduct market studies and finds implications for Korean antitrust authority.
  • 3.

    Regulatory Holidays vs. Guaranteed Risk Premium: Comparing Measures to Balance Returns on Essential Facilities Investments

    Namhoon Kwon | 2010, 19(1) | pp.69~97 | number of Cited : 2
    Abstract PDF
    Expecting heavy regulations on essential facilities ex post, firms may avoid or delay socially beneficial investment projects on infrastructure. For example, although the prospect for next generation network (NGN) has been blooming for quite a while, regulators in many countries have had difficult times to persuade operators to invest in fiber optic access networks. It has been proposed that the investment risks faced by operators should be reduced by exempting newly deployed networks from access regulation, awarding “regulatory holidays” to operators. However, those who oppose to this idea claim that there is no need for allowing monopoly exploitation, because the same goal can be achieved by allowing constant risk premium under regulation. In this paper, I survey the recent debate on this issue and devise a simple theoretical model to compare two approaches. It is shown that, while constant risk premium approach is generally better in terms of maximizing social welfare, there are some cases in which regulatory holidays is optimal.
  • 4.

    The Study on the Lack of Casuality Claims for the Merger Control

    Lee, Hosun | 2010, 19(1) | pp.99~130 | number of Cited : 5
    Abstract PDF
    The concentration between undertakings has pro or neutral competitive effects as well as anti-competitive effects, so it requires the competition authority to regulate very carefully the merger cases in deciding whether or not allowed under the competition law. Thus, the Monopoly Regulation and Fair Trade Act provides the merger defences which are divided into the efficiency claims and the failing firm claims. However, it should not be overlooked that the failing firm defences consists of two different kind of claims. One is related to pure failing firms, and the other referred to flailing firms. When the competition authority recognized the existence of the former defence, it should approve the merger without considering more anti or pro competitive effects, because the deterioration of the competition in the market will be inevitably occurred irrelevant to it. On the contrary, if the latter, flailing firm defence, is concerned, it is necessary to compare the anti competition effects with the pro competition effects according to the level of the overall national economy. In this article, the author tries to establish the possibilities of the lack of causality doctrine under the current guidelines on the mergers cases, and suggest how to separate the standard on the efficiency claims to limit the scope of flailing firm defences.
  • 5.

    An Economic Analysis on the Circular Equity Investment

    Hyun Jong Kim | 2010, 19(1) | pp.131~154 | number of Cited : 6
    Abstract PDF
    I examine the properties of the circular equity investment that is the investment in the form of rings. At the first, I theoretically research how the circular equity investment affect to the ownership-control disparity of a business group. When the investment cycle is formed, cash flow rights , the ownership, of all affiliated firms are increased while the voting right, the control right, of only the last affiliate is increased and others' voting rights decrease. Therefore the circular equity investment raises the last affiliate's ownership-control disparity but decreases other affiliates' ones. I show that, because of this attribution, the circular equity investment has ambiguous effects on the ownership-control disparity in the business group level. Secondly, I point out that “fictional capital” is created not from the circular equity investment but from any equity investment. I show the empirical case that the fictional capital ratio of a business group with the simple M-form structure is greater than one of the business groups with circular investment structures.
  • 6.

    Ownership and Efficiency : Evidence from the Korean Electricity Market

    김대욱 | 김유수 | 2010, 19(1) | pp.155~178 | number of Cited : 1
    Abstract PDF
    In theory, private power plants have incentives to withhold outputs to exercise market power. On the other hand, they also have incentives to operate power plants efficiently to minimize operation costs. Therefore, the ultimate answer for this question is an empirical subject. Using two types of unbalanced panel data, we estimate input demand function to examine whether private power plants used fuels efficiently relative to a set of plants that remained under government control or experienced recent ownership changes. Our estimation results suggest that private power plants used fuels efficiently about 6.3%~10% relative to a set of other power plants. In addition, private power units operated about 14% efficiently compared to public power plants.
  • 7.

    A Study on the Dividends from government-invested institutes : Current Status and Evaluation

    Ki Young Kim | Kyung-Jin Park | Young-Tae Yoo | 2010, 19(1) | pp.179~212 | number of Cited : 2
    Abstract PDF
    In terms of developing sources for revenue, it is meaningful to judge the reasonable level of dividend from government-invested institute and examine ways to expand the dividend given that the policy of tax cut has remained and fiscal spending has expanded. With reference to governmental dividend by government-invested institute under the jurisdiction of general account, the dividend surged from 336 BN Won in 2005 to 937.8 BN Won in 2008 and plunged back to 343.5 BN Won in 2009. To check whether each institute reserves a reasonable dividend policy, this paper identifies the ratio of a current revenue from dividend by calculating maximum profit available for dividend, points out problems in calculating profit available for dividend, and examines the extent to which tax burdens and fiscal deficits can be released by applying a reasonable dividend rate assumed. In the case of paying as much of dividend as payout ratio subject to sustainable growth rate, the ratio of maximum profit available for dividend to proper dividend amount is approximately 77.7% and the ratio of tax burden drops from 16.20% to 16.06%. Those figures indicate that comprehensive budget balance of 2009 has improved 24.3% more than that of 2008. There are some problems founded in the recent 5-year revenue on dividend paid from government-invested institute. First of all, a few of public enterprises in a financial sector hold major sources of total revenue on dividend. Second, the dividend payout ratios of government- invested institutes are extremely low. Lastly, regarding laws and regulations associated with dividend of government- invested institute, the ratio of retained amount is extremely high and the sources of dividend are based on profits occurred in the same year as dividend is paid. To resolve those problems, government- invested institutes take individual profitability and capital structure into account when they design the dividend policy.