More than half of the 82 major conglomerates surveyed have holding companies, with 38 groups transitioning to a “holding company system.” The average ownership stake in holding companies held by conglomerate owners and their families has slightly decreased compared to the previous year.
According to the “Status of Holding Companies under the Fair Trade Act in 2023,” released by the Fair Trade Commission (FTC) on Dec. 17, the number of domestic holding companies reached 172 as of the end of September this year, marking an increase of four from the 168 reported at the end of December last year. Since December of last year, 23 new general holding companies have been established, while 19 have been excluded.
The number of holding companies has steadily increased since the introduction of the system in 1999. However, the number decreased in 2017 as the total asset requirement increased from 100 billion won to 500 billion won. Nevertheless, the trend reversed, and there has been a resurgence in the number of holding companies since 2021.
Among the 82 major conglomerates, 42 have holding companies, which is an increase of five compared to the previous year when 37 out of 76 conglomerates had holding companies.
The number of major corporate groups that own holding companies and have shifted to the holding company system has increased by 7, reaching a total of 38 compared to the previous year’s 31. The holding company system refers to a situation where the total assets of the holding company and its subsidiaries, sub-subsidiaries and sub-sub-subsidiaries account for more than 50% of the total assets of all affiliated companies in the corporate group.
The average ownership ratio of all holding companies is 79.4%, with 79.0% for non-financial holding companies and 86.5% for financial holding companies. The ownership ratio refers to the percentage of the total value of subsidiary company stocks in the total assets of the holding company.
The average debt ratio for all holding companies is 41.7%, with a 47.5% ratio for corporate groups that have converted to the holding company system. This level is noticeably below the holding company debt ratio limit of 200%.
The average number of subsidiaries, sub-subsidiaries and sub-sub-subsidiaries for holding companies is 5.6, 7.3, and 0.9, respectively. Each holding company, on average, controls 13.8 affiliated companies.
Within conversion groups, the average number of subsidiaries, sub-subsidiaries and sub-sub-subsidiaries for holding companies is 10.6, 19.5, and 3.1, respectively. Each holding company within conversion groups, on average, controls 33.2 affiliated companies.
The average ownership stake for subsidiaries and sub-subsidiaries within general holding companies and subsidiaries is 72.9%, with 39.7% for listed and 85.6% for unlisted, and 82.6%, with 48.0% for listed and 85.2% for unlisted. The figures comfortably exceed the mandatory ownership ratio requirement for subsidiaries and sub-subsidiaries.
The average ownership ratio of conglomerate owners and their families in holding companies within conversion groups with owners is 23.2% and 46.6%, respectively. The figures represent a slight decrease compared to the previous year’s 24.5% and 49.4%.
The average ownership stake for conglomerate owners and their families in holding companies within newly converted groups is 18.0% and 43.9%, respectively. The figures are relatively lower compared to the overall average.
Out of the 40 foreign subsidiaries within conversion groups with owners, 36 are making direct investments in domestic subsidiaries.
It has been revealed that conglomerate owners and their families are dominating a total of 353 affiliated companies outside the holding company system, with an average of 9.8 companies, within conversion groups. Among them, 226 affiliated companies outside the system were subject to regulations on misappropriation of profits.
A representative from the FTC stated, “Despite the increase in the total asset requirement for holding companies, the holding company system continues to be firmly established as a major ownership structure within corporate groups. We plan to expand conditions for companies to continuously choose the holding company system as one of their ownership structures, including improvements in regulations related to general holding companies holding CVCs.”