The Effect of Target Ownership Structure in the Wealth Gains in Owner-Manager Dominant Acquisitions: Evidence from Korean Cases

Abstract

This paper examines how the distribution of target ownership is

related to the wealth gains of target shareholders in owner-manager??

dominant acquisitions, in which a firm is managed by managers and

directors nominated and closely directed by controlling shareholders.

Using the Korean case of mergers and acquisitions during 1996-2007,

we find that the agency problem exists between owner-managers and

non-controlling shareholders. This finding is different from what we can

observe in the US case, where the agency conflict between managers

and shareholders is more crucial. In the meantime, the effect of the

bidders top 30 chaebol membership on the wealth of target

shareholders is inconclusive. In order to resolve the agency problem, the

presence of institutional shareholding may be effective.