"Conglomerate Holding Companies with Chairpersons Have 13.7% Internal Transaction Ratio... Still Higher than Non-Holding Companies"

Fair Trade Commission, 2021 Analysis Results of Ownership Stakes and Profit Structures of Holding Companies

Ownership Stake of the Controlling Family, Holding Companies 48% · General Groups 38%
Internal Transaction Ratio, Holding Companies 13.7% · General Groups 10.4%
Holding Companies, Dividend Income 44.6% · Non-Dividend Income 47.9%

[Asia Economy Reporter Joo Sang-don] The proportion of internal transactions within holding companies of large business groups controlled by the same individual (controlling family) was 13.7%, a decrease from the previous year, but still 3.3 percentage points higher than that of large business groups with a non-holding company structure.

On the 21st, the Korea Fair Trade Commission disclosed the results of an analysis titled "Ownership, Investment Status, and Revenue Structure of Holding Companies." The analysis targeted 32 holding companies belonging to 27 large business groups with controlling families that had transitioned to a general holding company system as of the end of September this year (transition groups).

The average ownership stake of the controlling individual and the controlling family (including the controlling individual) in holding companies belonging to the transition groups was 26.0% and 50.1%, respectively, similar to the previous year (26.3% and 49.5%). However, the average ownership stake of the controlling family in the representative holding companies of the transition groups was 48%, higher than the average ownership stake of the controlling family in the representative companies of general groups (38.0%). The representative company refers to the company responsible for aggregating and disclosing the disclosure items of companies belonging to the relevant publicly disclosed business group and for preparing items difficult for individual companies to prepare.

Additionally, the average voting rights held by the controlling individual and the controlling family in holding companies of the transition groups were 27.8% and 53.3%, respectively, higher than their ownership stakes, indicating concentrated control within the controlling family.

The investment depth of the transition groups (3.2 levels) was lower than that of the general groups (4.5 levels), confirming that the transition groups have a simpler and more vertical investment structure characteristic of holding company systems.

Regarding the investment status of overseas affiliates belonging to the transition groups in domestic affiliates, 35 overseas affiliates invested in 30 domestic affiliates. The transition groups with many overseas affiliates investing in domestic affiliates were Lotte (16), SK and LG (4 each), Kolon and Dongwon (3 each), Doosan (2), CJ, Hite Jinro, and Hanjin (1 each), in that order.

The internal transaction ratio of the transition groups, measured as the proportion of sales revenue earned from domestic affiliates, was 13.68%, down 1.6 percentage points from the previous year (15.3%). However, this remains higher than the average of general groups (10.4%).

The internal transaction ratio within companies inside the transition group system was 13.8%, down from 15.6% the previous year, while the internal transaction ratio with companies outside the system was 11.4%, up from 8.7% the previous year.

Holding companies in the transition groups showed a higher proportion of revenue from non-dividend income sources such as brand fees, real estate rental fees, and management and consulting fees (47.9% of sales) than from dividend income (44.6% of sales). Among 23 representative holding companies belonging to transition groups with controlling families, 12 had non-dividend income proportions exceeding 50%, with six companies including Booyoung and Bando Holdings having this proportion above 70%.

A Fair Trade Commission official stated, "Holding companies in transition groups have concentrated ownership stakes (50.1%) within the controlling family, and the average ownership stake of the controlling family in representative holding companies of transition groups is 10 percentage points higher than that in representative companies of general groups. Continuous monitoring is necessary regarding the possibility that controlling families may exploit the holding company system to expand control through loopholes without corresponding governance responsibilities."

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