2018, Vol.6, No.2

Asset Management Review 2023 KCI Impact Factor : 0.55

pISSN : 2288-6672 / eISSN : 2713-6248
https://journal.kci.go.kr/capm

The separate structure of the ownership and control of the corporation implies the risk of the agent problem that the manager can pursue his private interests. As a solution to this, the monitoring role of institutional investors is emphasized recently. This study examines whether the National Pension Service (hereinafter referred to as the "NPS"), which is the largest pension fund in Korea, performs this role appropriately. In particular, we analyze the influence and feasibility of the exercise of voting rights by the NPS using the data disclosed by the NPS in 2015. The results show that the NPS shows a 2% abnormal return over 10 trading days after displaying the objection at the general shareholders' meeting, confirming that the market is positive about the opposing opinions of the NPS. In particular, it provides a high abnormal return of about 6% in merger and acquisition approval related matters. In addition, when analyzing the characteristics of firms, firms with low growth rates and poor corporate governance are more likely to be opposed by the NPS.

On February 9, 2018, the U.S. Court of Appeals for the D.C. Circuit held that U.S. managers of collateralized loan obligations (CLOs) are not required to retain a financial interest in the CLOs under the U.S. risk retention rules. In its decision, the court noted that CLOs are not susceptible to the moral hazard inherent in the “Originate to Securitize” model that Dodd-Frank was intended to curtail. CLOs are actively managed and their fee structure aligns the interests of the collateral manager with those of the investors by providing for payment of the significant management fees only after the CLO has paid off its debt and has achieved a specified hurdle rate of return on its equity tranche. The capitalized manager vehicle (CMV) structure facilitates this alignment of interests as well as the additional risk retention requirements. Tax leakage on the cash flowing from the underlying borrowers of the CLO’s leveraged loans through the CLO issuer and into the hands of the noteholders can also occur at the level of payments by the CLO issuer, potentially decreasing their after-tax returns. We make comments about the Dodd-Frank risk retention issues in connection with the D.C. Circuit Court ruling and related impacts from the latest U.S. Tax Cuts and Jobs Act (“Tax Act”) of 2017 in terms of tax compliances. We also discuss some various cross-border tax issues between Korea and the U.S. relevant to qualified Korean individual and institutional investors. While retaining their anonymity, Korean investors would rather avoid paying foreign taxes or at least entitled to the tax treaty benefits. A typical solution to this issue is to make Korean investors put their contribution through an offshore blocker corporate entity established primarily for non-U.S. investors. This offshore blocker corporation will ensure that the Korean investor’s identity will not have to be disclosed to the U.S. tax authority, regardless of the outstanding FATCA rules.

This paper analyzes herd behavior in the growth enterprise market(GEM) of China. Herd behavior means that sheep or other animals move together at the same time when they are in a herd. This paper provides the brief reviews of theory of herd behavior and empirically tests the existence of herd behavior in the GEM by two regression models(non-linear model and transaction volume model) using the cross-section absolute deviation(CSAD) measure. The main results of this paper are as follows. First, there is strong herd behavior in the Chinese GEM in all the three periods ; flat market, bull market and bear market. Second, the herd behavior in the GEM is more obvious in the bull market and relatively weak in the bear market. Third, we infer the strong herd behavior in the GEM is caused by imperfection of information disclosure system, excessive government intervention on the GEM, and speculative factors in GEM. Based on above findings, we suggest that the GEM investors need to invest based on the more fundamental approach than market sentiment, and Chinese financial authority should minimize market intervention and supplement the operational systems of the GEM, such as information disclosure and short selling, in order to increase the efficiency of the GEM.