When Do Controlling Shareholders “Over-invest”? The Disciplinary Effect of Product Market Competition

Hyung Cheol Kang, Ji Hye Lee, Hee Sub Byun

Research output: Contribution to journalArticlepeer-review


<Abstract> This study examines the effect of the interaction between controlling shareholder ownership and product market competition on investment inefficiency in Korea. Consistent with classical agency theory, this study finds that the lower the controlling shareholder owner-ship, the greater the overinvestment. However, this relationship strengthens in non-competitive markets but disappears in competitive markets. This suggests that product market competition has a disciplinary effect on the incentive of controlling shareholders to pursue private benefits. This study has implications for the disciplinary effect of competition and expands the literature on agency theory in emerging countries with concentrated ownership structures.

Original languageEnglish
Pages (from-to)35-75
Number of pages41
JournalKorean Journal of Financial Studies
Issue number1
StatePublished - Feb 2023


  • Agency Problem
  • Controlling Shareholder
  • Overinvestment
  • Ownership Structure
  • Product Market Competition


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