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korean management review - Vol. 53 , No. 1

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[ Article ]
korean management review - Vol. 50, No. 5, pp. 1255-1277
Abbreviation: kmr
ISSN: 1226-1874 (Print)
Print publication date 31 Oct 2021
Received 09 Feb 2021 Revised 21 May 2021 Accepted 08 Jun 2021
DOI: https://doi.org/10.17287/kmr.2021.50.5.1255
Owner-Managers and the Implied Cost of Equity Capital: Evidence from Chaebol Firms
Soo Yeon Park ; Hongmin Chun
(First Author) School of Business Administration, Chung-Ang University (sooyeonpark@cau.ac.kr)
(Corresponding Author) Department of Business Administration, Sungshin Women’s University (hmchun@sungshin.ac.kr)
소유 경영자가 내재 자기자본비용에 미치는 영향: 재벌기업을 중심으로

Copyright 2011 THE KOREAN ACADEMIC SOCIETY OF BUSINESS ADMINISTRATION This is an open access article distributed under the terms of the Creative Commons Attribution License 4.0, which permits unrestricted, distribution, and reproduction in any medium, provided the original work is properly cited.


Funding Information ▼ Korea Sanhak Foundation

Abstract

This paper examines whether and how different CEO types affect the implied cost of equity capital in Korean chaebol firms. Using 946 firm-year observations of KOSPI-listed firms for the period 2005-2015, a significant positive correlation was observed between chaebol firms with owner-managers and the implied cost of equity capital. This implies that investors regard the agency problems of Korean chaebol firms that have owner-managers as a risk premium factor that requires a higher cost of capital. Moreover, the positive association between chaebol firms that have owner-managers and the implied cost of equity capital was more pronounced in firms with a low proportion of outside directors and high uncertainty period. This paper has potential implications for related literature in that owner-managers, internal governance, and education level may significantly influence the cost of equity capital in Korean chaebol firms.


Keywords: owner-managers, agency problem, proportion of outside directors, uncertainty period, implied cost of equity capital

Acknowledgments

This research was supported by the Korea Sanhak Foundation(KSF) Research fund in 2021. We appreciate anonymous reviewers for providing valuable comments.

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∙ The author Soo Yeon Park is currently an assistant professor at School of Business Administration, Chung-Ang University. Her recent research interests are stock price crash risk, family-controlled firms, CEO types and characteristics, ESG, etc. Her papers have been published or forthcoming in many SSCI and SCOPUS journals such as Sustainability, Managerial Auditing Journal, Emerging Markets Finance and Trade, etc.

∙ The author Hongmin Chun is currently an associate professor at Department of Business Administration, Sungshin Women’s University. His main research topic including audit effort, cost of capital, ESG and published 10 SSCI indexed journals such as Managerial Auditing Journal, Applied Economics, Business Ethics: A European Review etc.