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[ Article ]
korean management review - Vol. 45, No. 6, pp. 1929-1953
Abbreviation: kmr
ISSN: 1226-1874 (Print)
Print publication date 31 Dec 2016
Received 03 Aug 2016 Accepted 01 Sep 2016
DOI: https://doi.org/10.17287/kmr.2016.45.6.1929
Asymmetric SG&A Cost Behavior of Chaebol Firms
Jae Yong Shin* ; Iny Hwang** ; Sewon Kwon*** ; Sera Choi****
*Associate professor, College of Business Administration, Seoul National University, First Author
**Associate professor, College of Business Administration, Seoul National University, Corresponding Author
***Ph.D. Candidate, College of Business Administration, Seoul National University, Co-Author
****Ph.D. Student, College of Business Administration, Seoul National University, Co-Author
재벌기업의 비대칭적 원가행태에 대한 연구
신재용* ; 황인이** ; 권세원*** ; 최세라****
*(주저자) 서울대학교 경영학과 부교수 (jshin@snu.ac.kr)
**(교신저자) 서울대학교 경영학과 부교수 (hiny72@snu.ac.kr)
***(공저자) 서울대학교 경영학과 박사과정 (k4js11@gmail.com)
****(공저자) 서울대학교 경영학과 박사과정 (src0422@gmail.com)
Funding Information ▼ The Institute of Management Research at Seoul National University

This paper investigates whether and how the degree of SG&A cost stickiness differs between chaebol and non-chaebol firms in Korea. The unique feature among Korean firms is the prevalence of large business groups called chaebols and, the differential natures between chaebol and non-chaebol firms drive cost behavior to diverge between two groups.

The ownership structure of chaebol firms is characterized by the dominance of single largest shareholder and his family members who typically participate in the management of the firm directly or indirectly and influence most of the importance management decisions. Moreover, the dominant owner plays an influential role in deciding whether to promote the managers or how much to reward based upon the performance of managers. Thus, such monitoring mechanism brought out by unique ownership structure of chaebol system suppresses managers’empire- building incentives, a particular Type Ⅰ agency problem, which are known to drive sticky cost behavior as in Chen, Lu and Sougiannis(2012). Under this agency perspective, chaebol firms may have lower degree of cost stickiness compared to non-chaebol firms. To further extent, the agency problems for chaebol firms are not merely on the conflicts of interests between shareholders and managers (Type Ⅰ agency problems) but, also concentrated on the conflicts of interest between controlling shareholders and outside minority shareholders (Type Ⅱ agency problems). Therefore, the differential agency problem among chaebol firms may result in different cost behavior, relative to non-chaebol firms.

Although a few literature attempt to examine the cost behavior of chaebol firms, the empirical results have been mixed. We revisit the link between chaebol and cost stickiness in order to resolve inconclusive findings. Based on a comprehensive dataset of Korean firms listed in KOSPI market from 2001 to 2013, we empirically find that the degree of cost stickiness is on average, lower in chaebol firms than in non-chaebol firms, even exhibiting anti-sticky behavior.

We further conduct several cross-sectional analyses to examine the effect of firm size and corporate governance (e.g. board independence, the existence of controlling owner as a board member) on chaebol firms’ cost behavior. First, the anti-stickiness in chaebol firms is more prevalent when the firm size is small. Large chaebol firms must bear political costs induced by high media attention making them difficult to divest the resources in response to sales changes whereas, small chaebol firms can have more flexibility in resource adjustments, resulting in a lower degree of cost stickiness. Second, in terms of corporate governance, the anti-stickiness in chaebol firms is more prevalent when the firm has a higher degree of corporate board independence or a controlling owner as a board member. Because good corporate governance measured by board independence effectively monitors managers’ perverse incentives (i.e. empire-building incentives) in addition to controlling owners monitoring managers, less sticky behavior is presented among firms with an independent board. Apart from board independence, the existence of a controlling owner as a board member also reduces the agency problems between shareholders and managers thus, results in a lower degree of cost stickiness.

Our study makes several important contributions to the accounting literature. First, we increase the understanding of chaebol firms, in particular how chaebols adjust the resources committed to activities. We contrast the cost stickiness of chaebol versus non-chaebol firms to articulate the differential cost management of chabols compared to non-chaebols. Second, cross-sectional analyses provide further implications on the effects of firm size and corporate governance on differential cost stickiness between chaebol and non-chaebol firms. Lastly, we converge cost behavior studies, which is the primary stream of research in managerial accounting with the key topic in finance or financial accounting, namely Korean chaebols. This study extends the research on cost behavior, and deepens the understanding of chaebols.

본 연구에서는 대규모기업집단의 소속여부와 원가 비대칭성 사이의 관련성을 검증하였다. 특히, 이러한 관계가 기업의 규모나 기업지배구조 특성(이사회의 독립성, 소유경영자 존재 여부)에 의해 영향을 받는지를 연구하였다. 2001년부터 2013년까지 유가증권시장에 상장된 7,475개 기업연도를 대상으로 관련 테스트를 수행하였다. 주요한 발견점들은 다음과 같다. 첫째, 대규모기업집단에 소속된 기업들의 경우 판매관리비의 하방경직성이 완화되는 것으로 나타났다. 둘째, 대규모기업집단에 소속된 기업들의 판매관리비의 하방경직성이 완화되는 것은 규모가 작은 기업들에 집중적으로 나타났다. 셋째, 대규모기업집단에 소속된 기업들 중 판매관리비의 하방경직성이 완화되는 것은 주로 사외이사 비율이 높은 기업들에서 발견되었다. 마지막으로, 소유경영자가 경영하는 대규모기업집단에 소속된 기업의 경우 판매관리비의 하방경직성이 완화됨을 발견하였다.