Chaebol

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Chaebol
Hangul
Hanja
Revised Romanization Jaebeol
McCune–Reischauer Chaebŏl
IPA [tɕɛ̝bʌl]

A chaebol ( /ˈbɒl,ˈɛbəl/ , [1] [2] Korean : 재벌; lit. "rich family"; Korean pronunciation:  [tɕɛ̝.bʌl] ) is a large industrial conglomerate that is run and controlled by a person or family in South Korea. [2] A chaebol often consists of many diversified affiliates, controlled by a person or group of persons whose power over the group often exceeds legal authority. [3] The first known use in an English text was in 1972. [2] Several dozen large South Korean family-controlled corporate groups fall under this definition.

Contents

Chaebols have also played a significant role in South Korean politics. In 1988, a member of a chaebol family, Chung Mong-joon, president of Hyundai Heavy Industries, successfully ran for the National Assembly of South Korea. Other business leaders also were chosen to be members of the National Assembly through proportional representation. [4] Hyundai has made efforts to contribute to the thawing North Korean relations, but not without controversy. [5] Many South Korean family-run chaebols have been criticized for low dividend payouts and other governance practices that favor controlling shareholders at the expense of ordinary investors. [6]

Etymology

The word "chaebol" derived from the McCune–Reischauer romanization, chaebŏl, of the Korean word jaebeol (재벌, from jae "wealth or property" + beol "faction or clan" – also written with the same Chinese characters 財閥 as zaibatsu in Japan). [2] The first known use in an English text was in 1972. [2]

History

The former headquarters of Hyundai in Seoul. Hdhq.jpg
The former headquarters of Hyundai in Seoul.

South Korea's economy was small and predominantly agricultural well into the mid-20th century. However, the policies of President Park Chung Hee spurred rapid industrialisation by promoting large businesses, following his seizure of power in 1961. The First Five Year Economic Plan [3] by the government set industrial policy toward new investment, and chaebols were to be guaranteed loans from the banking sector. The chaebol played a key role in developing new industries, markets, and export production, helping make South Korea one of the Four Asian Tigers.

Although South Korea's major industrial programs did not begin until the early 1960s, the origins of the country's entrepreneurial elite were found in the political economy of the 1950s. Very few Koreans had owned or managed larger corporations during the Japanese colonial period. After the departure of the Japanese in 1945, some Korean businessmen obtained the assets of some of the Japanese firms, a number of which grew into the chaebols of the 1990s. [4]

The companies, as well as certain other firms that were formed in the late 1940s and early 1950s, had close links with Syngman Rhee's First Republic, which lasted from 1948 to 1960. It is confirmed that many of these companies received special treatment from the government in return for kickbacks and other payments. [4]

When the military took over the government in 1961, its leaders announced that they would eradicate the corruption that had plagued the Rhee administration and eliminate "injustice" from society. Some leading industrialists were arrested and charged with corruption, but the new government realized that it would need the help of entrepreneurs if the government's ambitious plans to modernize the economy were to be fulfilled. A compromise was reached, under which many of the accused corporate leaders paid fines to the government. Subsequently, there was increased cooperation between corporate and government leaders in modernizing the economy. [4] :152

Government-chaebol cooperation was essential to the subsequent economic growth and astounding successes that began in the early 1960s. Driven by the urgent need to turn the economy away from consumer goods and light industries toward heavy, chemical, and import-substitution industries, political leaders and government planners relied on the ideas and cooperation of chaebol leaders. The government provided the blueprints for industrial expansion; the chaebol realized the plans. However, the chaebol-led industrialization accelerated the monopolistic and oligopolistic concentration of capital and economically profitable activities in the hands of a limited number of conglomerates. [4]

Park used the chaebol as a means towards economic growth. Exports were encouraged, reversing Rhee's policy of reliance on imports. Performance quotas were established. [4]

Chaebols were able to grow because of two factors: foreign loans and special favors. Access to foreign technology also was critical to the growth of the chaebol through the 1980s. Under the guise of "guided capitalism," the government selected companies to undertake projects and channeled funds from foreign loans. The government guaranteed repayment should a company be unable to repay its foreign creditors. Additional loans were made available from domestic banks. In the late 1980s, chaebols dominated the industrial sector and were especially prevalent in manufacturing, trading, and heavy industries. [4]

Chaebols experienced tremendous growth beginning in the early 1960s in connection with the expansion of South Korean exports. Growth resulted from the production of a diversity of goods rather than just one or two products. Innovation and the willingness to develop new product lines were critical. In the 1950s and early 1960s, chaebols concentrated on wigs and textiles; by the mid-1970s and 1980s, heavy, defense, and chemical industries had become predominant. While these activities were important in the early 1990s, real growth was occurring in the electronics and high-technology industries. Chaebols also were responsible for turning the trade deficit in 1985 to a trade surplus in 1986. The current account balance, however, fell from more than US$14 billion in 1988 to US$5 billion in 1989. [4]

Chaebols continued their explosive growth in export markets in the 1980s. By the late 1980s, they had become financially independent and secure, thereby eliminating the need for further government-sponsored credit and assistance. [4]

By the 1990s, South Korea was one of the largest newly industrialised countries and boasted a standard of living comparable to industrialized countries.

Former headquarters of the defunct Daewoo Group, once the second-largest conglomerate in South Korea. Seoul Square.jpg
Former headquarters of the defunct Daewoo Group, once the second-largest conglomerate in South Korea.

President Kim Young-sam began to challenge the chaebol, but it was not until the 1997 Asian financial crisis that the weaknesses of the system were widely understood. Of the 30 largest chaebol, 11 collapsed between July 1997 and June 1999. Initially, the crisis was caused by a sharp drop in the value of the currency and aside from immediate cash flow concerns for paying foreign debts, the lower cost ultimately helped the stronger chaebols expand their brands to Western markets, but the simultaneous decline of nearby export markets in Southeast Asia, which had been fueling growth made the large debts incurred, for what was now overcapacity, was fatal to many. The remaining chaebols also became far more specialized in their focus. For example, with a population ranked 26th in the world, before the crisis, the country had seven major automobile manufacturers. Afterward, only two major manufacturers remained intact though two additional continued, in a smaller capacity, under General Motors and Renault. Chaebol debts were not only to state industrial banks but also to independent banks and their own financial services subsidiaries. The scale of the loan defaults meant that banks could neither foreclose nor write off bad loans without themselves collapsing, so the failure to service these debts quickly caused a systemic banking crisis, and South Korea turned to the IMF for assistance. The most spectacular example came in mid-1999, with the collapse of the Daewoo Group, which had some US$80 billion in unpaid debt. At the time, it was the largest corporate bankruptcy in history.

Investigations also exposed widespread corruption in the chaebol, particularly fraudulent accounting and bribery.

Still, South Korea recovered quickly from the crisis, and most of the blame for economic problems was shifted to the IMF. The remaining chaebols have grown substantially since the crisis, but they have maintained far lower debt levels.

In 2014, the largest chaebol, Samsung, composed about 17% of the South Korean economy and held roughly US$17 billion in cash. However, recent financial statements of these chaebols actually show that chaebols are slowly losing power over either international competition or internal disruptions from newly emerging startups. Net profit/income of South Korea's top conglomerates has decreased from 2012 to 2015. [7] Not only did their profits stop increasing, but certain chaebols such as LG, have been making losses and losing talent.

Corporate governance

Management structure

Some chaebols are one large corporation while others have broken up into loosely connected groups of separate companies sharing a common name. Even in the latter case, each is almost always owned, controlled, or managed by the same family group.

South Korea's chaebols are often compared with Japan's keiretsu business groupings, the successors to the pre-war zaibatsu. While the "chaebol" is similar to the "zaibatsu" (the words share the same hanja/kanji), some major differences have evolved:

The chaebol model is heavily reliant on a complex system of interlocking ownership. The owner, with the help of family members, family-owned charities, and senior managers from subsidiaries, has to control only three of four public companies, who themselves control other companies that control subsidiaries. A good example of this practice would be the owner of Doosan, who controlled more than 20 subsidiaries with only a minor participation in about 5 companies. [8]

Equity

The chairman of a typical chaebol possesses a small portion of equity in the companies under the large umbrella of the chaebol but is very powerful in making decisions and controls all management. For example, Samsung owns 0.5% in the group's listed firms. That demonstrates a lack in the rule of law. [3] The method that allows this type of possession is called cross-holding, which is a horizontal and vertical structure that enhances the control of the chairman. [9]

Workplace culture

The typical culture at one of these conglomerates is highly paternalistic in nature. Much of the environment is defined by the chairman who acts as a "fatherly-figure" to his subordinates. This can be traced back to the infusion of Neo-Confucian values that permeate Korean society. A chaebol head's demeanor towards his employee can be described as "loving" while maintaining "sternness and a sense of responsibility". Workers commit to long hours, most notably on weekends and holidays, in order to appease their superiors. [10] Company outings and drinking sessions tend to be compulsory as to foster a sense of family and belonging among employees. Employers believe that enhancing a common bond between them would translate into prosperity and productivity for the company. Other practices that would be uncommon for Western workplaces to engage in include gift-giving to employees and arranging dates for workers in search of relationships or marriage. Chaebols are notoriously hierarchical. As such, it is unusual for an individual to challenge or question the decision-making of his or her boss. This dynamic adds to the culture that orients itself around whoever is in charge; but can lead to undesirable circumstances. For example, the Asiana flight 214 crash led critics to speculate that cultural factors prevented a pilot on board from aborting the low-speed landing and thus straying from his superior's commands. [11] Promotion is rarely merit based. Rather, it is through order of age and time served to the conglomerate. This is reflected by the fact that most executives are far older than their employees. If a worker does not attain an executive or senior-management role by the age of fifty, he or she is commonly forced into resignation. Again, this is attributable to the age-hierarchy dynamics in Korean Confucian culture. A typical firm heavily emphasizes loyalty to the firm, as demonstrated in the standard recruiting process. Newly acquired employees undergo an intense initiation that includes activities such as training camps and singing company unique songs that reiterate the production goals of the firm. [10]

Relationship with labor unions

Because of Korea’s long-lasting relationship with chaebols, it is no surprise that Korea has always suppressed and ignored labor unions. As of today, there are only two legally recognized labor unions in South Korea: The Federation of Korean Trade Unions and the Korean Confederation of Trade Unions. [12] Despite these unions’ attempts at reform, the South Korean government does not take much action. If a union were to overstep and openly criticize a chaebol, they face serious repercussions, as chaebols are essentially government identities. [12] It is well known that tax evasion is a regular practice done by chaebols. When compared to non-chaebol companies, though, chaebols are less likely to evade taxes when facing issues with unions. [13] This is most likely because non-chaebols will actively evade taxes to meet appropriate wages for unionized workers. Chaebols, on the other hand, have enough financial wealth to make “under-the-table” arrangements with unions.

Criticism

Even though the chaebol system helped bring about rapid growth and helped Korea launch itself on the international stage, it caused negative impacts on the Korean economy.

Emergence and inflation

The origins of the chaebol system in South Korea come as a consequence of the Korean War. The war resulted in much destruction and halted industrial production, which led the government to print money to pay for the war and meet requirements of the United Nations forces for the Korean currency, all of which caused mass inflation. This inflation caused many commodity prices to double every six months.

The government had to react and so devised a plan in providing strong financial incentives to private companies between the 1960s and 1970s. These included the government's choosing to select various family businesses to distribute the incentives (imported raw materials, commodities, bank loans). The impact was immediate, and most of the businesses flourished rapidly. The protection of infant companies allowed them to develop because of the highly regulated market, which prevented foreign companies from entering. [14] Many companies that were not in the circle of businesses saw the system as flawed and corrupted. [3] While these problems resemble "crony capitalism" problems common in developing countries, corruption scandals have periodically occurred in all chaebols.

Internal market transactions accountability

Because the government gave out incentives to help businesses, it had a lot of control over them. However, there was no way to ensure the businesses would use the incentives in an effective and efficient manner. [3] In other words, there was no external monitoring system to monitor chaebols and ensure that they were efficient in the allocation of resources. [15] All businesses undertake internal market transactions, which constitute "purchase and sale of intermediate inputs, the provision and receipt of loan collaterals, and the provision and receipt of payment guarantees among member firms in a business group". [16] There is the question of efficiency, especially in production and management. Therefore, the chaebol system was not very transparent. Behind the scenes, businesses were provided with subsidiary financing and intragroup transactions. This allowed them easy loans to cover for their deficits, and prior to the 1997 Asian financial crisis, huge debts had accumulated, many of which were hidden. That gave the illusion that the system was flourishing into the 1990s. [3]

Relationship with foreign investors

According to the Defense Language Institute Foreign Language Center, the majority of South Korea’s economy is driven by exports. [17] South Korea is one of the leading exporters worldwide. Additionally, the majority of investors in the Korean stock market are foreign investors. Out of 711 listed companies in the Korean stock market, approximately 683 have shares that are held by foreign investors. [18] Nearly a third of the market’s value is owned by foreigners, a trend that is expected to continue.

Because of their major role in the Korean stock market, foreign investors play a massive part in whether or not chaebol conglomerates remain financially successful. Foreign investors tend to avoid chaebols, especially those who displayed heavy political influence in South Korea, like Samsung and Hyundai. Investors are reluctant to invest in large control-ownership disparity businesses because these companies tended to cheat shareholders in order to have higher personal financial gain. [18] This information is extremely helpful, especially when it comes to determining how these corrupt conglomerates are still heavily supported, considering foreign investors show little interest in them. A study published in the Journal of the Japanese and International Economies found that after the 1997 Asian financial crisis, foreign investment behavioral patterns changed drastically. While foreign investors like to hold shares in large companies with high profit and liquidity margins, they do not show any particular interest in either chaebol or non-chaebol companies. [19] Nonetheless, chaebols are still able to survive, highlighting just how much power and aid they receive from the Korean government.

"Too big to fail"

During the 1997 Asian financial crisis, bankers feared that chaebols would go bankrupt so they allowed these businesses to roll over their loans each time they were unable to repay their debts. Many did not believe that the chaebols were capable of collapsing and that the more they borrowed, the safer they were.

However, the theory was proven wrong when many businesses collapsed during the crisis. Since they were linked through debt guarantees, many of the companies fell in a chain reaction. [3] The focus on capacity expansion created debt that was manageable when the economy was growing. However, when the economy stalled, debt-to-equity ratios became a huge problem. [20]

Since the crisis, chaebols now have less debt and are less vulnerable to similar crises, as was demonstrated in the 2008 crisis. With the growth of the fewer remaining chaebols, however, each now occupies a larger portion of the economy.

Monopolistic behavior

The protectionist policies and preferable government treatment granted Chaebols the ability to exhibit monopolistic behavior. The absence of a market free of intervention meant that "true competition" became a rarity in South Korea. Especially in the era prior to the 1997 Asian financial crisis, the only products available to the Korean people were those made by Chaebols. Therefore, the social fabric of the country lacked a welcoming culture towards entrepreneurship. The intensity and extent of market concentration became evident as 80% of the country's GDP is derived from Chaebols. The largest of the group, Samsung, exports 20% of South Korea's goods and services alone. Although no longer financially supported by the government, these firms have attained economies of scale on such a massive level that it is extremely difficult for a startup or small or medium enterprise (SME) to surmount the high barriers to entry. A majority of these smaller companies ended up becoming acquired by the Chaebols, thereby further stacking their size and economic dominance. During recent years a growing tend to scale globally has increased among aspiring Korean entrepreneurs. [21] Conversely, Chaebols have also been moving money abroad with the tacit endorsement of the South Korean government and investing in commercial enterprises, particularly in Koreatown Manhattan, New York City. [22]

To this day, Chaebols maintain dominance across all industries. Reductions in tariffs and removal of trade regulations designed to protect Korean conglomerates have led to increasing competition from abroad. However, among domestic firms, Chaebols have kept their market share intact. Most notably, Apple's entry into the smartphone market pressured rival Samsung into diversifying its revenue streams from overseas. All but 3 of the top 50 firms listed on the Korean Stock Exchange are designated as Chaebols. [10] Consequently, Chaebols have more bargaining power and often take pricing action that squeezes both suppliers and consumers. Typically the firms down the supply chain fail to increase their profit margins enough to expand and thus never see growth. Collusion among Chaebols is commonplace. Price-fixing acts mean consumers expect to pay an inflated value for most goods and services. [10] For instance, in 2012 Samsung and LG Electronics were fined for colluding to raise prices for home appliances. [23]

Government ties, corruption and abuse of power

South Korean President Park Geun-hye at a breakfast meeting with business magnates Lee Kun-hee and Chung Mong-koo. Korea President Park Business Leaders 20130508 01.jpg
South Korean President Park Geun-hye at a breakfast meeting with business magnates Lee Kun-hee and Chung Mong-koo.

Since the inception of the chaebol, the government has been closely involved in its affairs. Many of the reforms enacted over the years, especially those under President Kim Dae-Jung, have cracked down on kickbacks and preferential treatment. Moreover, the state is no longer a majority shareholder of any chaebol. [10] But their sheer size and wealth has been used to gain influence. For the most part, the government sees the function of chaebols as crucial to the Korean economy. When President Lee Myung-Bak took office, he pardoned Samsung Group chairman Lee Kun-Hee for tax evasion. President Lee then proceeded to champion pro-chaebol deals, including a nuclear energy contract with the city of Abu Dhabi, and loosened laws preventing the conglomerates from owning financial services companies. [24] Samsung's leader is not the only chaebol chairman to be excused from a crime conviction. Choi Tae-Won of SK Group, Chung Mong-Koo of Hyundai, Kim Seung-Youn of Hanwha, and Shin Dong-bin of Lotte [25] are a few examples of chairmen who have been charged, convicted, or are currently serving a prison sentence for white-collar crime. Accusations include bribery, tax evasion, accounting fraud, embezzlement, and violent crime. [26] Typically chaebol chairmen are pardoned. 15 August is recognized in South Korea as Liberation Day. This is when the president forgives the chairmen for their infractions in order to ensure they remain in power of their companies. [27] In the rare case that an executive is sentenced to prison, as the CEOs of SK and CJ group were, it is typically a relatively light punishment of up to 4 years depending on the charge. [28]

Collusion between chaebol members and the government granted preferential statuses to the companies. A chaebol would funnel bribes to politicians and bureaucrats through slush funds and illegal donations. This could help maintain the government's position of power, allowing them to secure contracts for major government projects and provide favorable treatment to the donor firm. [29] Examples of this type of corruption were widespread in the years leading up to the 1997 financial crisis. Many of the firms that benefited from this relationship were too indebted, had poor corporate governance, and were inefficient. There was a huge inflow of capital and bending of regulation in favor of these problematic firms. Hanbo Group, formerly South Korea's second-largest steel-maker, is a good example of this. In the 1990s the company paid for special arrangements with high-ranking politicians so that it could secure contracts for large government projects over its competitors. Hanbo went bankrupt in 1997 after defaulting on debt payments along with other governance issues. Numerous chaebol companies had similar private agreements with the government in this fashion. It would be most common in companies dealing with heavy industries or projects that involved government procurement and urban planning. In the past, most successful political elections were won with chaebol support. Each time a new administration or regime stepped in, it would gear its policy platform towards chaebol revitalization. [29] This was under the claim that in order to be a competitive economy more power must be given to the chaebols. In recent years, the leading political parties of South Korea have reversed their pro-large corporate stance to one of economic diversification.

Like many other conglomerates across the world, Korean chaebols are beginning to establish their presence online and in popular media. There are a large number of k-dramas (Korean dramas) that revolve around chaebols. Some of these shows include Crash Landing on You, Strong Woman Do Bong Soon, What’s Wrong with Secretary Kim, and The Heirs. Most of these series discuss the luxury and hardships that chaebol family members face, giving viewers the opportunity to sympathize with them. In addition, many chaebol families have taken to social media outlets like Instagram and Twitter, where they publish snippets of their personal life. Some chaebol families also partake in popular social media trends like mukbangs, as is seen on the popular YouTube channel 햄연지 YONJIHAM. Some have suggested that these attempts at humanizing chaebols are purely financial strategies. [30]

Reforms

It has been questioned whether real reform is possible. [31]

IMF agreement

Under Kim Dae-Jung and in the wake of the 1997 Asian financial crisis, many reforms were made to the chaebols. Most of these changes pertained to corporate structure, transparency in financial reporting, corporate governance, and debt stabilization. In 1997, the IMF provided a bailout loan of $60 billion conditional on revision. [10] Distressed financial institutions were to be closed down and those that were deemed viable were to be restructured and recapitalized by the levels it set forth. This affected the chaebol because it severely restricted its easy access to financing that led to over leveraged balance sheets. [32] Lenient accounting practices and disclosure rules were to be strengthened and standardized for international practice. Hence, transparency was increased to what would be expected from a public company. The chaebols agreed to be subject to independent auditors and were obligated to provide consolidated financial statements on a regular basis. [29]

Government-led reforms and 2008 crisis

Kim Dae-Jung enacted what is known as the "Five Principles of Corporate Governance". [32] These were the enhancement of management transparency, strengthening owner-manager accountability, elimination of cross-debt guarantees among chaebol affiliates, improvement of capital structures, and consolidation of core business areas. In his plans, debt to equity ratios were to be below 200%. Chaebol subsidiaries that were debt-laden or on the verge of bankruptcy were instructed to be either liquidated, sold, or put up for merger. Each chaebol-holding group had to break up its subsidiaries and operations so that they were more manageable. [29] By the end of 1997, each had an average of 26.8 subsidiaries. It was hoped that if there were fewer activities, the quality of the remaining businesses would see improvement. Many unrelated branches to their core competencies were swiftly shed. If any of the conglomerates failed to meet the conditions by the set deadlines, strict sanctions would be passed against them. During the 2008 Financial crisis, many of these reforms ensured chaebols' quick recovery. [32] Having had exposure to a massive recession before, they learned to cope better than those in foreign countries. With significantly healthier balance sheets and higher cash reserves, the chaebols were able to avoid any liquidity issues. Moreover, with fewer subsidiaries they were less exposed to the full scope of the crisis and thus helped keep the Korean economy afloat. [29]

President Roh Moo Hyun pushed for even more extensive reform. [32] His administration passed stringent regulations on fraudulent accounting, stock manipulation, and irregular wealth succession. Chaebols were forced to improve objectivity on their board of directors. Rather than having the decision-makers be insiders, affiliates, or family members, chaebols were expected to hold representation who reflected the interests of investors, especially minority shareholders who gained a significant number of rights. As a result, it became easier for chaebols to raise capital through equity rather than riskier debt. This is because the new transparency laws and restructuring boosted investor confidence from abroad. [10]

Regulation

Laws were passed to limit the expansion of chaebol:

Formally, the Korea Fair Trade Commission (KFTC; 공정거래위원회; 公正去來委員會) announces a limited chaebol list every year as size of industrial assets (not including financial companies). [33]

Chaebols with limited assurance (상호출자제한기업집단; 相互出資制限企業集團)

Chaebols by revenue

The following charts list chaebols in order by different categories.

Major chaebols by family groupsFamily Groups
Lee Byung-chul family group Samsung Group, Shinsegae Group, CJ Group, JoongAng Group, BGF Group, and others
Chung Ju-yung family group Hyundai Motor Group, Hyundai Heavy Industries Group, Hyundai Department Store Group, Hyundai Marine & Fire, Halla Group, HDC Group, KCC Corporation, and others
Koo In-hwoi family group LG Group, GS Group, LS Group, LX Group, LIG Group, Ourhome Corp, LF Group, LT Group, and others.
Shin Kyuk-ho family group Lotte Group, Nongshim, Pulemil, and others.
Other chaebols SK Group, Hanwha Group, Doosan Group, Booyoung Group, Mirae Asset Financial Group, Daelim Group, Kumho Group, Celltrion, Hyosung Group, Young Poong Group, Dongwon Group, Kyobo Life Insurance, DB Group, Kolon Industries, Korea Investment Holdings, Halim Group, Hankook Tire, OCI Group, E-Land Group, Taekwang Group, Amorepacific Corporation, Seah Steel Holdings, Dongkuk Steel, Aekyung Group, Samyang Group, Kumho Petrochemical, HiteJinro, Eugene Group, KG Group, etc.
Chaebols by each GroupsNumber of subsidiariesMajor businesses
Samsung Group 59Electronics, semiconductors, insurance, construction, shipbuilding, trading
Hyundai Motor Group 53Automobiles, auto parts, steel, construction, logistics, finance
SK Group 148Energy, telecom, semiconductors, chemicals, trading
LG Group 70Electronics, chemicals, batteries, telecom, display, cosmetics
Lotte Group 86Retail, chemicals, food, entertainment, construction, tourism
Hanwha Group 83Explosives, aerospace, energy, chemicals, insurance, leisure
GS Group 80Energy, retail, construction, trading
Hyundai Heavy Industries Group 33Shipbuilding, engineering, energy, construction equipment, robotics
Shinsegae Group 45Retail, food, fashion, hotels
CJ Group 79Food, logistics, entertainment, media
Hanjin Group 31Aviation, logistics, hotels, tourism
Chaebols by each unitParentRevenue (KRW)Total Assets (KRW)Industries
Samsung Electronics Samsung Group 236.8 trillion378.2 trillionElectronics, semiconductors, mobile phones, display, etc.
Samsung Life Insurance Samsung Group 34.5 trillion336.6 trillionInsurance
Samsung C&T Samsung Group 30.2 trillion54.3 trillionConstruction, trading, engineering, etc.
Samsung Fire & Marine Insurance Samsung Group 24.0 trillion92.6 trillionInsurance
Samsung SDI Samsung Group 11.3 trillion21.5 trillionBatteries, electronics
Samsung Electro-Mechanics Samsung Group 8.2 trillion9.2 trillionElectronic component manufacturing
Samsung SDS Samsung Group 11.1 trillion9.2 trillionIT Solutions, cloud, etc.
Hyundai Motor Company Hyundai Motor Group 103.9 trillion209.3 trillionAutomobiles
Kia Hyundai Motor Group 59.2 trillion60.5 trillionAutomobiles
Hyundai Mobis Hyundai Motor Group 36.6 trillion48.5 trillionAuto parts
Hyundai Steel Hyundai Motor Group 18.0 trilion34.8 trillionSteel
Hyundai Engineering & Construction Hyundai Motor Group 16.9 trillion17.9 trillionConstruction, engineering
Hyundai Glovis Hyundai Motor Group 16.5 trillion10.9 trillionLogistics
SK Holdings SK Group 81.8 trillion137.6 trillionHolding (consolidated result by share rate)
SK Telecom SK Group 18.6 trillion47.9 trillionTelecom, communications
SK Hynix SK Group 31.9 trillion71.2 trillionSemiconductors
SK Innovation SK Group 34.2 trillion38.5 trillionEnergy
SK Networks SK Group 10.6 trillion8.8 trillionTrading, logistics
LG Holdings LG Group 6.6 trillion24.3 trillionHolding (consolidated result by share rate)
LG Electronics LG Group 63.3 trillion48.2 trillionElectronics, appliances, etc.
LG Chem LG Group 30.1 trillion41.4 trillionBatteries, chemicals, bio-chemicals, etc.
LG Display LG Group 24.2 trillion35.1 trillionDisplay, pannels
LG Uplus LG Group 13.4 trillion18.4 trillionTelecom, communications
Lotte Holdings Lotte Group 9.1 trillion16.7 trillionHolding (consolidated result by share rate)
Lotte Chilsung Lotte Group 2.3 trillion3.5 trillionFood
Lotte Shopping Lotte Group 16.2 trillion32.9 trillionShopping, logistics, etc.
Lotte Chemical Lotte Group 12.2 trillion19.4 trillionChemicals
Hanwha Holdings Hanwha Group 50.9 trillion191.2 trillionHolding (consolidated result by share rate)
Hanwha Life Insurance Hanwha Group 26.2 trillion148.8 trillionInsurance
Hanwha Solutions Hanwha Group 9.2 trillion15.1 trillionRenewable energy, high-tech, etc.
GS Holdings GS Group 15.4 trillion24.5 trillionHolding (consolidated result by share rate)
GS Construction GS Group 10.1 trillion13.8 trillionConstruction
GS Retail GS Group 8.9 trillion7.2 trillionRetail
Shinsegae Shinsegae Group 4.8 trillion12.8 trillionDepartment Stores, fashion, etc.
E-mart Shinsegae Group 22.0 trillion22.3 trillionRetail, food
CJ Holdings CJ Group 32.1 trillion40.0 trillionHolding (consolidated result by share rate)
CJ CheilJedang CJ Group 24.2 trillion25.6 trillionFood, bio-chemicals
CJ E&M CJ Group 3.4 trillion6.3 trillionEntertainment, media, etc.
Hanjin Hanjin Group 2.2 trillion3.8 trillionLogistics, transportation,
Korean Air Hanjin Group 7.6 trillion25.1 trillionAviation
CompanyRevenue (KRW)Total Assets (KRW)Industries
KEPCO 58.6 trillion203.1 trillionElectric power, energy, power plants, etc.
POSCO 57.8 trillion79.1 trillionSteel
POSCO International 21.4 trillion8.3 trillionTrading, development, etc.
Korea Land & Housing Corporation 24.4 trillion185.2 trillionConstruction, real estate, etc.
KT Corporation 23.9 trillion33.7 trillionTelecom, communications, etc.
Korea Tobacco & Ginseng Corporation 5.3 trillion11.5 trillionTobacco, ginseng, etc.
HMM 6.4 trillion9.4 trillionShipping, logistics
NH Investment & Securities 12.8 trillion62.7 trillionInvestments, securities, etc.
Nonghyup Bank 13.8 trillion315.2 trillionFinance
KB Financial Group 55.7 trillion610.6 trillionFinance
Shinhan Financial Group 29.0 trillion605.2 trillionFinance
Hana Financial Group 48.2 trillion460.2 trillionFinance
Woori Financial Group 28.6 trillion399.1 trillionFinance
DSME 7.0 trillion10.3 trillionShipbuilding, heavy industries, etc.
Naver Corporation 5.3 trillion17.0 trillionE-commerce, search engine, etc.
S-Oil 16.8 trillion15.7 trillionEnergy

See also

Related Research Articles

A keiretsu is a set of companies with interlocking business relationships and shareholdings. In the legal sense, it is a type of informal business group that are loosely organized alliances within the social world of Japan's business community. The keiretsu maintained dominance over the Japanese economy for the second half of the 20th century, and, to a lesser extent, continues to do so in the early 21st century.

Economy of South Korea National economy of South Korea

The economy of South Korea is a highly developed mixed economy dominated by family-owned conglomerates called chaebols. It is the 4th largest GDP in Asia and the 10th largest in the world. South Korea is known for its rise from one of the poorest countries in the world to a developed, high-income country in just a few generations. This economic growth has been described as the Miracle on the Han River, which has brought South Korea to the ranks of countries in the OECD and the G-20. South Korea still remains one of the fastest growing developed countries in the world following the Great Recession. It is included in the group of Next Eleven countries as having the potential to play a dominant role in the global economy by the middle of the 21st century.

Conglomerate (company) Large company involved in many industries

A conglomerate is a multi-industry company – i.e., a combination of multiple business entities operating in entirely different industries under one corporate group, usually involving a parent company and many subsidiaries. Conglomerates are always large and multinational.

Hyundai Group is a South Korean conglomerate founded by Chung Ju-yung. The first company in the group was founded in 1947 as a construction company. With government assistance, Chung and his family members rapidly expanded into various industries, eventually becoming South Korea's second Enterprise Group. The company spun off many of its better known businesses after the 1997 Asian financial crisis, including Hyundai Motor Group, Hyundai Department Store Group, and Hyundai Heavy Industries Group. Chung Ju-yung was directly in control of the company until his death in 2001.

<i>Zaibatsu</i>

Zaibatsu is a Japanese term referring to industrial and financial vertically integrated business conglomerates in the Empire of Japan, whose influence and size allowed control over significant parts of the Japanese economy from the Meiji period until the end of World War II. A zaibatsu's general structure included a family owned holding company on top, and a bank which financed the other, mostly industrial subsidiaries within them. Although the zaibatsu played an important role in the Japanese economy from the 1860s to 1945, they increased in number and importance following the Russo-Japanese War of 1904–1905, World War I and Japan's subsequent attempt to conquer East Asia during the inter-war period and World War II. After World War II they were dissolved by the Allied occupation forces and succeeded by the keiretsu.

1997 Asian financial crisis Financial crisis of many Asian countries during the second half of 1997

The Asian financial crisis was a period of financial crisis that gripped much of East Asia and Southeast Asia beginning in July 1997 and raised fears of a worldwide economic meltdown due to financial contagion. However the recovery in 1998-1999 was rapid.

Mitsui Japanese multinational coporate group (keiretsu)

Mitsui Group is one of the largest keiretsu in Japan and one of the largest corporate groups in the world.

Daewoo South Korean car manufacturer

Daewoo also known as the Daewoo Group, was a major South Korean chaebol and car manufacturer.

Financial services Economic service provided by the finance industry

Financial services are the economic services provided by the finance industry, which encompasses a broad range of businesses that manage money, including credit unions, banks, credit-card companies, insurance companies, accountancy companies, consumer-finance companies, stock brokerages, investment funds, individual managers, and some government-sponsored enterprises.

Miracle on the Han River Period of rapid economic growth in South Korea, following the Korean War (1950–1953)

The Miracle on the Han River refers to the period of rapid economic growth in South Korea, following the Korean War (1950–1953), during which South Korea transformed from a developing country to a developed country. The rapid reconstruction and development of the South Korean economy during the latter half of the 20th century was accompanied by events such as the country's successful hosting of the 1988 Summer Olympics and its co-hosting of the 2002 FIFA World Cup, as well as the ascension of family-owned conglomerates known as chaebols, such as Samsung, LG, and Hyundai.

A corporate group or group of companies is a collection of parent and subsidiary corporations that function as a single economic entity through a common source of control. The concept of a group is frequently used in tax law, accounting and company law to attribute the rights and duties of one member of the group to another or the whole. If the corporations are engaged in entirely different businesses, the group is called a conglomerate. The forming of corporate groups usually involves consolidation via mergers and acquisitions, although the group concept focuses on the instances in which the merged and acquired corporate entities remain in existence rather than the instances in which they are dissolved by the parent. The group may be owned by a holding company which may have no actual operations.

Sogo shosha are Japanese companies that trade in a wide range of products and materials. In addition to acting as intermediaries, sōgō shōsha also engage in logistics, plant development and other services, as well as international resource exploration. Unlike trading companies in other countries, which are generally specialized in certain types of products, sōgō shōsha have extremely diversified business lines, in which respect the business model is unique to Japan.

Kumho Asiana Group South Korean conglomerate

Kumho Asiana Group is a large South Korean Chaebol (conglomerate), with subsidiaries in the construction, leisure, and logistics industries. The group is headquartered at the Kumho Asiana Main Tower in Sinmunno 1-ga, Jongno-gu, Seoul, South Korea. As of 2014, the largest shareholder is Park Sam-koo, the third son of the company's founder, who stepped down as CEO in 2010.

Samsung Heavy Industries Co., Ltd. is one of the largest shipbuilders in the world and one of the "Big Three" shipbuilders of South Korea. Geoje is one of the largest shipyards in the world, having 3 dry docks and 5 floating docks. A core subsidiary of the Samsung Group, South Korea's largest conglomerate, SHI's main focus is on the engineering, procurement, construction, commissioning and the delivery of: transportation ships for the commercial industry, topsides modules, drilling and floating production units for the oil and gas sector, gantry cranes for fabrication yards, digital instrumentation and control devices for ships, and other construction and engineering services.

The Financial Supervisory Service (FSS) is South Korea's integrated financial regulator that examines and supervises financial institutions under the broad oversight of the Financial Services Commission (FSC), the government regulatory authority staffed by civil servants.

This article is intended to give an overview of the trade policy of South Korea. In 1945 Korea was liberated from the Empire of Japan at the end of World War II. A destructive drought in 1958 forced Korea to import large amounts of food grains. In 1950, the Korean war broke out, which destroyed more than two-thirds of the nation's production facilities and most of its infrastructure. Trade policy of South Korea has taken many shifts, from import substitution to globalization and there has been significant impact on the economy for the same.

Samsung Commercial Vehicles

Samsung Commercial Vehicles was a South Korean trucks and construction equipment manufacturer established by the Samsung Group in 1996 and closed in 2000 as a result of the 1997 Asian financial crisis. The company was formed through a corporate spin-off from Samsung Heavy Industries.

Conglomerate discount is an economic concept describing a situation when the stock market values a diversified group of businesses and assets at less than the sum of its parts. The explanation of this phenomenon comes from a conglomerate's inability to manage various and different businesses as well as do focused companies. Therefore, the market penalizes a multi-division firm and attaches a lower multiple to its earnings and cash flows, thus creating the discount. However, the opposite concept, called conglomerate premium, also exists.

The corporate debt bubble is the large increase in corporate bonds, excluding that of financial institutions, following the financial crisis of 2007–08. Global corporate debt rose from 84% of gross world product in 2009 to 92% in 2019, or about $72 trillion. In the world's eight largest economies—the United States, China, Japan, the United Kingdom, France, Spain, Italy, and Germany—total corporate debt was about $51 trillion in 2019, compared to $34 trillion in 2009. Excluding debt held by financial institutions—which trade debt as mortgages, student loans, and other instruments—the debt owed by non-financial companies in early March 2020 was $13 trillion worldwide, of which about $9.6 trillion was in the U.S.

The South Korean IMF is an event when South Korea, which was amidst of a foreign exchange crisis, signed a memorandum of understanding with the International Monetary Fund on December 3, 1997. The IMF required for the introduction of policies such as fiscal and financial austerity, high-interest rates, the dissolution of chaebols, layoffs and floating exchange rates as conditions for bailouts, and the Korean government, which had to prevent the nation from going bankrupt immediately, was forced to accept those demands. As a result, corporate bankruptcies, mass unemployment and the crisis in the real economy accelerated further. The term is called the IMF, the IMF economic crisis, the IMF crisis and so on, but technically defining, the name IMF itself is a misrepresentation because it does not contain the meaning of the foreign exchange crisis. However, it is often used by the local media and other media due to its symbolism that South Korea requested bailout funds from the IMF.

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Notes