"Higher Owner Family Shareholding Correlates with Increased Internal Transactions"

Leaders Index Investigates 3,116 Affiliates of 78 Owner-Managed Groups
"Average Internal Transaction Ratio of Affiliates with Over 5% Stake is 55%"

An analysis revealed that large business groups with a high ownership stake by the owner family have a larger proportion of internal transactions.

Perspective view of 'Daebang Nobland' in Baegot New Town, Siheung-si, Gyeonggi-do. [Photo by Daebang Construction]

On the 2nd, Leaders Index, a corporate analysis research institute, surveyed 3,116 affiliates of 78 large business groups with owners and found that among last year's domestic and international sales of 1,902.4242 trillion KRW, internal transactions among affiliates amounted to 644.1206 trillion KRW (33.9%).

Among the surveyed affiliates, 604 affiliates (19.4%) had ownership stakes held by the owner family. The sales of these affiliates amounted to 953.13 trillion KRW, accounting for 50.3% of total sales.

The amount of internal transactions for affiliates with owner family stakes was 358.3871 trillion KRW, representing 37.6% of their sales. This was higher than the internal transaction ratio of 30.1% for affiliates without owner family stakes.

In particular, the average internal transaction ratio for affiliates with an owner family stake of 5% or more reached 55%. It was found that the higher the ownership stake of the owner family, the larger the proportion of internal transactions.

The group with the highest internal transaction ratio among affiliates with owner family stakes was Daebang Construction. Last year, among the total sales of 42 Daebang Construction affiliates amounting to 2.4671 trillion KRW, sales from Daebang Construction and Daebang Industrial Development, both with owner family stakes, accounted for 1.2154 trillion KRW (49.8%). Of these, 1.0489 trillion KRW, or 86.3% of the sales of Daebang Construction and Daebang Industrial Development, were internal transactions among affiliates.

Nexon followed. Among the sales of NXC and WiseKids, owned by the late founder Kim Jung-ju, NXC director’s spouse Yoo Jeong-hyun, and their two daughters, 336 billion KRW, or 84.1% of the 399 billion KRW in sales, were generated through internal transactions.

Besides Daebang Construction and Nexon, groups with a high proportion of internal transactions relative to sales included Samsung (66.5%), Celltrion (65.1%), Hankook Tire (61.1%), Hyundai Motor Company (59.2%), LG (56.1%), HDC (41.1%), Joongheung Construction (40.4%), and SeAH (39.1%).