Title: The transformation of ownership structure and changes in principal-principal conflicts: evidence from corporate governance reforms in South Korea

Authors: KwangWook Gang; Changyong Lee; Han-Gyun Woo

Addresses: Department of Management and Marketing, Franklin P. Perdue School of Business, Salisbury University, Salisbury, Maryland 21801-6860, USA ' School of Management Engineering, Ulsan National Institute of Science and Technology, Ulsan, 44919, South Korea ' School of Management Engineering, Ulsan National Institute of Science and Technology, Ulsan, 44919, South Korea

Abstract: Emerging economies are characterised by weak governance mechanisms, which can lead to principal-principal (PP) conflicts. The nature of PP conflicts may differ because governance mechanisms are transformed by corporate governance reforms. This study investigates how market reforms change the nature of PP conflicts and how such changes influence a firm's technological diversification strategy. Using 4952 firm/year observations for Korean manufacturing firms from 1993-2004, we find that the ownership concentration level decreases over time. Moreover, we find that as the difference between inside ownership and outside ownership increases, technological diversification accelerates prior to market reforms but diminishes after market reforms.

Keywords: corporate governance reform; principal-principal conflicts; technological diversification; Korean manufacturing firms.

DOI: 10.1504/IJCG.2017.089820

International Journal of Corporate Governance, 2017 Vol.8 No.3/4, pp.281 - 301

Received: 27 Apr 2017
Accepted: 15 Nov 2017
Published online: 12 Feb 2018 *

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