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Restrictions on Equity Investment and Ownership-Control Disparity

  • Journal of Regulation Studies
  • 2005, 14(1), pp.37-66
  • Publisher : 한국규제학회
  • Research Area : Social Science > Public Administration

최충규 1

1한국경제연구원

Candidate

ABSTRACT

This paper critically reviews the rationale of the “Restrictions on Equity Investment” (REI), provided in Lim (2003), and also the proposal by the Korea Fair Trade Commission (KFTC) to base regulation using the “Indices of Ownership-Control Disparity” (IOCD). We find that Lim (2003) analyzes firms' equity investments only in a static one-period model, and much of the analysis tends to lack supportive explanation for critical assumptions made, while different equity investments are unrealistically treated homogeneously. On the other hand, we find critical possible problems in the event that the KFTC restricts firms' voting rights based on the levels of IOCD calculated. Also, IOCD is problematic if it is used as a criterion for exempting firms from REI.

Citation status

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