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Korean J Financ Stud > Volume 47(5); 2018 > Article
Korean Journal of Financial Studies 2018;47(5):741-777.
DOI: https://doi.org/10.26845/KJFS.2018.10.47.5.741    Published online October 31, 2018.
Investors Already Know what Controlling Shareholders will do this Summer - A Study on the Conflicts of Interests between Controlling Shareholders and Minority Shareholders in Affiliated Mergers -
Kung Suh Park, Chan Shik Jung, Sun Min Kim
투자자는 지배주주가 이번 여름에 할 일을 알고 있다
박경서, 정찬식, 김선민
1고려대학교
2동아대학교
3한국기업지배구조원
Abstract
In the case of affiliated mergers, which involves a merger between affiliated firms within a business group, there is a possibility that controlling shareholders who can exercise influence on the managers of both firms, may benefit from favorable terms of contracts for the firm where he owns more shares.
This study analyzes the long-term stock returns before merger announcements comparing both affiliated mergers and independent mergers. We find that both the cumulative abnormal returns (CAR) and the buy-and-hold returns (BHAR) with matching firm analyses are positively correlated with the ownership of the controlling shareholders, and also with the difference between their ownerships on both firms in the case of affiliated mergers, while we don’t observe such phenomena in the case of mergers between independent firms. We also find the positive correlations are more significant for firms with weak product market competition or poor corporate governance.
These empirical results imply that stock investors expect that affiliated mergers would be conducted in favor of controlling shareholders, and such an expectation is reflected in the stock prices of the firms involved as a self-fulfilling phenomenon. The study also suggests that the current law that specifies the use of stock market prices in deciding the stock exchange ratio between merging firms needs a review as the rule can be justified only when stock market prices are fair and are not compromised
Key Words: 계열사간 합병,주식교환비율,지배주주,사적 이익 추구,소수주주,Affiliation Mergers,Stock Exchange Ratio,Controlling Shareholders,Tunneling,Minority Shareholders
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