The Impact of the Ownership Discrepancy Between Cash-Flow Rights and Voting Rights on Firms' Soft Asset Investment Decisions: Evidence from Large Business Groups in South Korea

摘要

This study investigates the impact of the ownership discrepancy between cash flow rights and voting rights on firms' soft asset investment decisions in large business groups in South Korea. We find a negative association between the ownership discrepancy and the level of investments in intangibles and human resources. Our finding implies that when controlling (or ultimate) shareholders have higher voting rights than their cash flow rights, they have more incentives to reduce firms' investments that are essential for business success in long-term strategic perspectives, exploiting minority shareholders' rights. In addition, we find that the negative association is more pronounced for firms with a higher level of free cash flows and that the negative association becomes less significant or insignificant in the period after the Internal Accounting Control System Legislation.