Study on Difference in Operational Risks among Business Conglomerates(“Chaebol”), Non－Chaebol Family－Owned Business and Other Businesses
Asian Tax Journal Vol. 13 No. 4 (2012), pp. 9-31
Abstract
This study is to classify business entities by ownership structure into (i) business conglomerates (i.e., “Chaebol”), (ii) non－Chaebol family－owned business and (iii) other businesses, and to empirically analyze whether such business structure gives a significant impact on the operational risk(i.e., ‘unlevered beta’) of a company, which is usually determined by multiple players in the capital market, and, if so, to identify where such influences are originated from. The classification described above was given to the companies which have consecutively maintained the status of public listing on the Korea Stock Exchange for the period from 2006 to 2010. The unlevered beta of each selected company was then calculated by excluding financial risks from the levered beta where the levered beta was estimated based on both the change in the yield rate on the price of a company against the prior day, and the change in the daily market portfolio yield rate under Equally－Weighted Index(EWL). In conclusion, the unlevered beta of a company is determined not only the operational characteristics but ownership structure of the business. In other words, it is the perception of the market participants who determine prices in the capital market that the operational risk of a company is determined not only by the operational structure of a company, such as total asset size, investments in capital－intensive industry, overseas expansions and business diversification of a company but ownership structure of the business. Accordingly, it is rather plausible to say that business conglomerates show a relatively higher level of unlevered beta compared to family－owned and other companies primarily driven by not only its larger asset size, active business expansions to multiple countries and widely－diversified business but the structural characteristic of its ownership. This study gives the different and meaningful perspectives compared to the preceding studies where the group of business conglomerates previously classified as family－business is reclassified into two separate groups. Also, the unlevered betas were calculated in the previous studies based on the key performance indicators such as revenue and profit whereas the unlevered betas in this study were determined by multiple market participants for each category of ownership structure.
Keywords
- Business conglomerates
- Family－owned business
- Ownership structure
- Unlevered beta
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