Corporate fraud under pyramidal ownership structure: Evidence from a regulatory reform

Daewoung Choi, Yong Kyu Gam and Hojong Shin

Emerging Markets Review, 2020, vol. 45, issue C

Abstract: This paper explores a causal relationship between firms' ownership structures and the likelihood of corporate fraud. We document that central firms that control the business group tend to commit corporate frauds related to unlawful intragroup trades (collusive activities and unfair transactions). Following South Korea's 2001 regulatory reform that imposes a ceiling on firms' total amount of shareholding of domestic companies, the frequency of corporate frauds was reduced more in central firms than in non-central firms as the controlling owner's cash-flow rights dropped more in central firms. These results suggest that controlling owners commit frauds to pursue their private benefit.

Keywords: Corporate fraud; Pyramidal ownership structure; Regulatory reform; Private benefit (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:45:y:2020:i:c:s1566014120300388

DOI: 10.1016/j.ememar.2020.100726

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