Top 10 Chaebol with Decreased Proportion and Amount of Internal Transactions

Fair Trade Commission Discloses Internal Transaction Status of Publicly Announced Business Groups in 2021

Disclosed Corporate Groups' Internal Transaction Amounts Decrease from 197 Trillion to 184 Trillion KRW, Share Drops from 12.2% to 11.4%
Top 10 Groups with Heads’ Internal Transaction Share Down by 1.0 Percentage Point
However, Internal Transaction Share Remains High in Companies with Higher Second-Generation Ownership

[Asia Economy Reporter Joo Sang-don] The proportion of internal transactions within disclosed corporate groups, including 10 groups with heads, has decreased. However, companies with higher second-generation ownership still showed a high share of internal transactions.

On the 16th, the Korea Fair Trade Commission (KFTC) released the analysis results of the "2021 Internal Transaction Status of Disclosed Corporate Groups."

This year, the total amount of internal transactions within disclosed corporate groups was 183.5 trillion KRW, with a share of 11.4%, down from last year’s 196.7 trillion KRW and 12.2%. The internal transaction share of the top 10 groups with heads?Samsung, Hyundai Motor, SK, LG, Lotte, Hanwha, GS, Hyundai Heavy Industries, Shinsegae, and CJ?decreased by 1.0 percentage point (from 14.1% to 13.1%), and the amount dropped by 15 trillion KRW (from 150.4 trillion KRW to 135.4 trillion KRW).

Newly designated groups included in this year’s analysis, such as Joongang, Daebang Construction, and Bando Holdings (8 groups), showed an internal transaction share of 7.8%, which is 3.7 percentage points lower than that of continuously designated groups (11.5%).

Similar to previous years, the internal transaction share was higher in unlisted companies (18.8%) than in listed companies (8.1%), and higher in groups with heads (11.6%) than in those without heads (10.2%).

The trend of higher internal transaction shares in companies with higher ownership by the head’s family or second generation continued. Companies where the second-generation ownership exceeded 20% had an internal transaction share of 22.7%, significantly higher than companies with less than 20% ownership (11.5%). This share was also distinctly higher compared to the overall analyzed companies (11.4%).

For companies subject to unfair profit appropriation regulations, both the internal transaction share and amount increased (by 0.2 percentage points and 100 billion KRW), whereas companies in the blind spot saw decreases in both (-1.2 percentage points and -2.4 trillion KRW).

Starting this year, the KFTC analyzed not only internal transactions of goods and services but also those involving funds and assets. According to the results, among 63 continuously designated corporate groups, 49 groups’ affiliated companies borrowed a total of 14.6 trillion KRW from domestic affiliates. Of this, non-financial companies borrowed 3.7 trillion KRW (25.3%) from affiliated financial companies. The groups with the largest borrowings by non-financial companies from affiliated financial companies were Nonghyup (3.39 trillion KRW), Lotte (120 billion KRW), Naver (80 billion KRW), and Mirae Asset (50 billion KRW), in that order.

Among 23 corporate groups, funds loaned to special related parties (excluding affiliates) amounted to 290 billion KRW. Except for Nonghyup among groups without heads, groups with heads (230 billion KRW) accounted for almost all of the funds loaned to special related parties.

A KFTC official stated, "This year as well, unfair support or profit appropriation acts by multiple corporate groups such as Samsung, SK, Lotte, and Harim have been corrected, but unfair support acts have not been eradicated, so continuous monitoring of unfair internal transactions is necessary." The official added, "Along with strengthening enforcement related to unfair internal transactions, fostering a voluntary culture of work sharing through expanding competitive bidding is required."

This content was produced with the assistance of AI translation services.