Corporate Governance and Dividend Policy Under Concentrated Ownership: Evidence from Post-Reform Korea

Okechukwu Enyeribe Njoku, Younghwan Lee () and Justin Yongyeon Ji
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Okechukwu Enyeribe Njoku: Department of Business Administration, Kumoh National Institute of Technology, Gumi 39177, Republic of Korea
Younghwan Lee: Department of Business Administration, Kumoh National Institute of Technology, Gumi 39177, Republic of Korea
Justin Yongyeon Ji: Department of Management, Towson University, Towson, MD 21252, USA

JRFM, 2026, vol. 19, issue 2, 1-21

Abstract: This study investigates how ownership structure conditions the transmission of corporate governance mechanisms into dividend policy within the context of South Korea’s evolving regulatory environment. Using a balanced panel of 5022 firm-year observations from 558 non-financial KOSPI-listed firms over 2011–2019, we analyze governance quality using data from the Korea Corporate Governance Service. We employ both an aggregate score and four constituent dimensions: board effectiveness, shareholder rights protection, audit committee competency, and disclosure transparency. The empirical framework combines firm fixed effects estimation, binary logistic regressions, and a two-step dynamic System GMM approach to account for unobserved heterogeneity, payout persistence, and endogeneity. The results reveal systematic heterogeneity across ownership regimes. Among non-Chaebol firms, higher governance quality across all dimensions is associated with higher dividend payouts, consistent with the governance outcome hypothesis. In contrast, among Chaebol-affiliated firms, the effectiveness of governance mechanisms is selective rather than uniform. While the aggregate governance score and shareholder rights protection retain explanatory power for dividend outcomes, internal oversight mechanisms related to board structure, audit competency, and disclosure do not exert independent influences once ownership structure is taken into account. These findings show that concentrated ownership structures condition which governance mechanisms remain effective in shaping payout policy. Regulators seeking to mitigate valuation discounts in conglomerate-dominated economies should prioritize the substantive empowerment of minority shareholder rights, as these mechanisms retain influence over payout policy even under concentrated ownership structures.

Keywords: corporate governance; dividend policy; Korea discount; ownership heterogeneity; shareholder rights; substitution hypothesis (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2026
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