본문 바로가기
  • Home

Nepotism in Korean Family Firms

  • Journal of Insurance and Finance
  • 2019, 30(3), pp.71-108
  • DOI : 10.23842/jif.2019.30.3.003
  • Publisher : Korea Insurance Research Institute
  • Research Area : Social Science > Business Management
  • Received : May 27, 2019
  • Accepted : August 19, 2019
  • Published : August 31, 2019

Kang Hyung Cheol 1 Byun, Hee Sub ORD ID 2

1서울시립대학교
2한림대학교

Accredited

ABSTRACT

This study investigates the determinants of nepotism by a controlling shareholder and its effect on firm value, using firms listed in Korea Exchange. After dividing a type of CEO into controlling shareholders, their children, and other relatives, we find the likelihood that controlling shareholders’ children is appointed as a CEO significantly increases in firms with high profitability, good industry outlook, and low risks. We also show that when children or other relative is appointed as a CEO, the firm value is significantly lower. These results are consistent with Perez-Gonzalez (2006) that nepotism can hurt minority shareholders’ wealth by restricting the efficiency of the managerial labor market. This study has the academic implication for presenting empirical evidence that controlling shareholders’ intention to succeed the management rights of profitable firms to their children can aggravate the firm value.

Citation status

* References for papers published after 2022 are currently being built.