Work

The Effect of Circular Shareholding Restrictions on Firm Innovation: Evidence from Korean Business Groups

Year: 2024

Type: article

Abstract: This study examines the effect of disproportional ownership structures on firm innovation. To establish a causal relationship, this study employs a difference-in-differences (DID) approach that utilizes Korea’s introduction of circular shareholding restrictions in 2014. The results show that circular shareholding restrictions negatively affect the level of firm innovation, as measured by the firm’s number of patents. This impact is more salient in R&D-intensive firms and industries with higher volatility. These findings suggest that disproportionate ownership promotes firm innovation by shielding managers from short-term equity market pressure.

Source: Korean Journal of Financial Studies

DOI: 10.26845/kjfs.2024.12.53.6.593

Author: Syungjin Han

Institution: Hongik University

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Peace, justice, and strong institutions, Industry, innovation and infrastructure

Open Access status: diamond

Funders: National Research Foundation, National Research Foundation of Korea, Ministry of Science and ICT, South Korea