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| Chaebol | |
| Hangul | 재벌 |
|---|---|
| Hanja | 財閥 |
| RR | jaebeol |
| MR | chaebŏl |
| IPA | [tɕɛbʌɭ] |
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| History |
|---|
| Business culture |
| Industries |
| Regional |
| Related topics |
Achaebol (UK:/ˈtʃeɪbəl,ˈtʃeɪbɒl/CHAY-bəl,CHAY-bol,[1][2]US:/ˈtʃeɪboʊl,ˈdʒɛbəl/CHAY-bohl,JEB-əl;[3]Korean: 재벌[tɕɛbɔɭ]ⓘ,lit. 'rich family' or'financialclique') is a large industrialSouth Korean conglomerate run and controlled by an individual or family.[3] A chaebol often consists of multiple diversified affiliates, controlled by a person or group.[4] Several dozen large South Korean family-controlled corporate groups fall under this definition. The term first appeared in English text in 1972.[3]
Chaebol have also played a significant role inSouth Korean politics. In 1988, a member of a chaebol family,Chung Mong-joon, president ofHyundai Heavy Industries, successfully ran for theNational Assembly of South Korea. Other business leaders were also chosen to be members of the National Assembly throughproportional representation.[5]Hyundai has made efforts in the thawing ofNorth Korean relations, despite some controversy.[6] Many South Korean family-run chaebol have been criticised for low dividend payouts and other governance practices that favor controllingshareholders at the expense of ordinaryinvestors.[7]
"Chaebol" is derived from theMcCune–Reischauer romanization of the Korean word재벌 (chaebŏl), without thebreve above the o. In 2000, theSouth Korean Ministry of Tourism introduced a new system of converting the Korean language into theRoman alphabet calledRevised Romanization.[8] Under the new transliteration style,재벌 is written asjaebeol, not chaebol. DespiteMcCune–Reischauer being largely abandoned in South Korea, the term is still ubiquitously written as chaebol.
The word originates from theSino-Japanese termzaibatsu (財閥), where財 means 'wealth' and閥 means 'clan'.[9] The Japanese zaibatsu dominated their economy from 1868 until they were dissolved under theAmerican Occupation of Japan in 1945. The rise and proliferation of the Korean chaebol resembles the Japanese zaibatsu at their peak.
The word has beenloaned into English since at least 1972.[3]
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South Korea's economy was small and predominantlyagricultural well into the mid-20th century. However,policies of PresidentPark Chung Hee spurred rapidindustrialisation by promoting large businesses, following his seizure of power in 1961.The First Five Year Economic Plan[4] by the government setindustrial policy towards 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 theFour 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 owned or managed larger corporations during the Japanese colonial period. After the Japanese left in 1945, some Korean businessmen obtained the assets of some of the Japanese firms, several of which grew into the chaebols of the 1990s.[5]
The Japanese colonial government sometimes sought to co-opt local businessmen and wealthy individuals often linked to land ownership, and a significant minority of industries were jointly owned by Japanese and Korean businesses. A few Korean chaebols, such as Kyungbang, came into existence during this era.[10]
The companies, as well as certain other firms that were formed in the late 1940s and early 1950s, had close links withSyngman 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.[5]
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.[5]: 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 themonopolistic and oligopolistic concentration of capital and economically profitable activities in the hands of a limited number of conglomerates.[5]
Park used the chaebol as a means of economic growth. Exports were encouraged, reversing Rhee's policy of reliance on imports. Performance quotas were established.[5]
Chaebols were able to grow because of two factors: foreign loans and special favours. 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 channelled 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.[5]
Chaebols experienced tremendous growth beginning in the early 1960s in connection with the expansion of South Korean exports. The 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, defence, 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 thetrade deficit in 1985 into a trade surplus in 1986. Thecurrent account balance, however, fell from more than US$14 billion in 1988 to US$5 billion in 1989.[5]
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.[5]
By the 1990s, South Korea was one of the largestnewly industrialised countries and boasted a standard of living comparable to industrialized countries.
PresidentKim Young-sam began to challenge the chaebol,[11][12] but it was not until the1997 Asian financial crisis that the weaknesses of the system were widely understood. Initially, the crisis was caused by a speculative attack on theThai baht, which lead to a sharp drop in its value and immediatecash flow concerns needed to pay foreign debts; widespreadforeign investment andfinancial deregulation acrossEast Asia allowed foreign investors to attack the values of the national currencies of other countries in the region, including South Korea, which spread the financial crisis to the affected countries and caused a downward spiral in the value of theSouth Korean won.[13] As a result, chaebols, which at this point were overleveraged in short-term debts and already suffering from falling export prices,[14] started going bankrupt: Of the 30 largest chaebols, 11 collapsed during the financial crisis.[15]
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[which?] remained intact, though two additional ones continued, in a smaller capacity, underGeneral Motors andRenault. Chaebol debts were not only to state industrial banks but also to independent banks and their 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 thecollapse of the Daewoo Group, which had some US$80 billion in unpaid debt. At the time, it was the largest corporate bankruptcy in history.[16] Investigations also exposed widespread corruption in the chaebols, particularly fraudulent accounting, and bribery.
South Korea recovered quickly from the crisis, and most of the blame for economic problems was shifted to theIMF, which had forced the government to adopt 30%interest rate in exchange for aUS$55 billion bailout. The remaining chaebols have grown substantially since the crisis, but they have maintained far lower debt levels.[16]
In 2019, the revenue of the largest chaebol,Samsung, was worth about17% of the South Korean GDP[17] with the company holding billions of dollars in cash. In 2023, the revenue of the top four chaebols (Samsung, SK, Hyundai, and LG) was40.8% of the South Korean GDP, and the top thirty chaebol were76.9% of GDP.[18]
Recent financial statements show chaebols are slowly losing power due to either international competition or internal competition from startups.[citation needed] The net profit of South Korea's top conglomerates decreased from 2012 to 2015.[citation needed]
| 2025 Rank | 2024 Rank | Change | Group Name | Representative | Affiliates 2025 | Affiliates 2024 | Assets 2025 (trillionKRW) | Assets 2024 (trillionKRW) | Type |
|---|---|---|---|---|---|---|---|---|---|
| 1 | 1 |  | Samsung | Lee Jae-yong | 63 | 63 | 589.1 | 571.4 | limited assurance[a] |
| 2 | 2 | | SK | Chey Tae-won | 198 | 219 | 363 | 352.1 | limited assurance[a] |
| 3 | 3 | | Hyundai Motor | Chung Eui-sun | 74 | 70 | 306.6 | 297.4 | limited assurance[a] |
| 4 | 4 | | LG | Koo Kwang-mo | 63 | 60 | 186.1 | 180.5 | limited assurance[a] |
| 5 | 6 |  1 | Lotte | Shin Dong-bin | 92 | 96 | 143.3 | 139 | limited assurance[a] |
| 6 | 5 |  1 | POSCO | POSCO | 49 | 47 | 137.8 | 133.7 | limited assurance[a] |
| 7 | 7 | | Hanwha | Kim Dong-kwan | 119 | 108 | 125.7 | 122 | limited assurance[a] |
| 8 | 8 | | HD Hyundai Heavy Industries | Chung Mong-joon | 32 | 29 | 88.7 | 86.1 | limited assurance[a] |
| 9 | 10 | 1 | NongHyup | NongHyup | 56 | 54 | 80.1 | 77.7 | limited assurance[a] |
| 10 | 9 | 1 | GS | Huh Chang-soo | 98 | 99 | 79.3 | 76.9 | limited assurance[a] |
| 11 | 11 | | Shinsegae | Chung Yong-jin | 59 | 53 | 63.9 | 61.9 | limited assurance[a] |
| 12 | 14 | 2 | Hanjin | Walter Cho | 42 | 34 | 58.2 | 56.4 | limited assurance[a] |
| 13 | 12 | 1 | KT | KT | 47 | 48 | 46.3 | 44.9 | limited assurance[a] |
| 14 | 13 | 1 | CJ | Lee Jay-hyun | 66 | 73 | 39.4 | 38.2 | limited assurance[a] |
| 15 | 16 | 1 | LS | Koo Ja-eun | 72 | 67 | 36 | 34.9 | limited assurance[a] |
| 16 | 15 | 1 | Kakao | Kim Beom-soo | 115 | 128 | 34.8 | 33.8 | limited assurance[a] |
| 17 | 20 | 3 | HMM | HMM | 4 | 5 | 33.5 | 32.4 | limited assurance[a] |
| 18 | 17 | 1 | Doosan | Park Jeong-won | 24 | 22 | 28.2 | 27.3 | limited assurance[a] |
| 19 | 18 | 1 | DL | Lee Hae-wook | 45 | 45 | 27 | 26.2 | limited assurance[a] |
| 20 | 21 | 1 | Jeungheung | Jeong Chang-seon | 51 | 53 | 26.7 | 25.9 | limited assurance[a] |
| 21 | 19 | 2 | Celltrion | Seo Jung-jin | 9 | 8 | 26.7 | 25.9 | limited assurance[a] |
| 22 | 23 | 1 | Naver | Lee Hae-jin | 45 | 54 | 25.5 | 24.7 | limited assurance[a] |
| 23 | 25 | 2 | S-Oil | S-Oil | 2 | 2 | 24.5 | 23.8 | limited assurance[a] |
| 24 | 22 | 2 | Mirae-Asset | 미래에셋 | 28 | 30 | 23.5 | 22.8 | limited assurance[a] |
| 25 | 27 | 2 | Coupang | Coupang | 16 | 13 | 22.3 | 21.6 | limited assurance[a] |
| 26 | 24 | 2 | Hyundai Department Store | 현대백화점 | 24 | 27 | 22.3 | 21.6 | limited assurance[a] |
| 27 | 49 | 22 | Hankook & Company | Jo Yang-Rae | 25 | 24 | 21.5 | 20.9 | limited assurance[a] |
| 28 | 26 | 2 | Booyoung | Lee Joong-geun | 21 | 21 | 21.5 | 20.8 | limited assurance[a] |
| 29 | 32 | 3 | Young Poong | Jang Hyung-jin | 30 | 28 | 20.9 | 20.3 | limited assurance[a] |
| 30 | 29 | 1 | Harim | Kim Hong-guk | 43 | 45 | 20 | 19.4 | limited assurance[a] |
| 31 | 33 | 2 | Hyosung | Cho Hyun-joon | 60 | 57 | 19.8 | 19.2 | limited assurance[a] |
| 32 | 38 | 6 | Sinokor | Jeong Tae-soon | 28 | 27 | 19.5 | 18.9 | limited assurance[a] |
| 33 | 30 | 3 | SM | Woo Oh-hyun | 58 | 58 | 18.3 | 17.8 | limited assurance[a] |
| 34 | 31 | 3 | HDC | Chung Mong-gyu | 34 | 35 | 17.5 | 17 | limited assurance[a] |
| 35 | 34 | 1 | Hoban | Kim Sang-yeol | 40 | 39 | 16.9 | 16.4 | limited assurance[a] |
| 36 | 53 | 17 | Dunamu | Dunamu | 11 | 12 | 15.9 | 15.4 | limited assurance[a] |
| 37 | 36 | 1 | KT&G | KT&G | 17 | 14 | 15.7 | 15.3 | limited assurance[a] |
| 38 | 40 | 2 | Kolon | Lee Woong-yeol | 45 | 48 | 15.2 | 14.7 | limited assurance[a] |
| 39 | 37 | 2 | KCC | Jeong Mong-jin | 13 | 14 | 15 | 14.5 | limited assurance[a] |
| 40 | 35 | 5 | DB | Kim Jun-ki | 24 | 25 | 14.8 | 14.4 | limited assurance[a] |
| 41 | 43 | 2 | Nexon | Yoo Jeong-hyeon | 23 | 19 | 14.5 | 14.1 | limited assurance[a] |
| 42 | 41 | 1 | OCI | Lee Woo-hyun | 24 | 24 | 13.8 | 13.4 | limited assurance[a] |
| 43 | 45 | 2 | LX | Bon-Joon Koo | 17 | 17 | 12.7 | 12.3 | limited assurance[a] |
| 44 | 44 | | SeAH Holdings | Lee Soon-hyung | 24 | 26 | 12.4 | 12 | limited assurance[a] |
| 45 | 46 | 1 | Netmarble | Bang Jun-hyuk | 31 | 35 | 11.8 | 11.4 | limited assurance[a] |
| 46 | 48 | 2 | E-Land | Park Seong-su | 32 | 31 | 11.6 | 11.3 | limited assurance[a] |
| 47 | 39 | 8 | Kyobo | Shin Chang-jae | 16 | 14 | 11.1 | 10.8 | publicly disclosed corporate group[b] |
| 48 | 58 | 10 | GM Korea | GM Korea | 3 | 3 | 10.8 | 10.5 | publicly disclosed corporate group[b] |
| 49 | 52 | 3 | Daokuwoom | Kim Ik-rae | 45 | 48 | 10.4 | 10.1 | publicly disclosed corporate group[b] |
| 50 | 51 | 1 | Kumho | Park Chan-gu | 16 | 14 | 10 | 9.7 | publicly disclosed corporate group[b] |
| 51 | 60 | 9 | Daebang | Gu gyo-un | 41 | 42 | 10 | 9.7 | publicly disclosed corporate group[b] |
| 52 | 42 | 10 | Taeyoung | Yoon Seyoung | 51 | 82 | 9.8 | 9.5 | publicly disclosed corporate group[b] |
| 53 | 54 | 1 | Samchully | Lee Man-deuk | 33 | 47 | 9.7 | 9.4 | publicly disclosed corporate group[b] |
| 54 | 56 | 2 | KG | Kwak Jae-sun | 26 | 34 | 9.6 | 9.3 | publicly disclosed corporate group[b] |
| 55 | 47 | 8 | EcoPro | Lee Dong-chae | 17 | 23 | 9.4 | 9.1 | publicly disclosed corporate group[b] |
| 56 | 57 | 1 | HL | Chung Mong-won | 15 | 13 | 9.3 | 9 | publicly disclosed corporate group[b] |
| 57 | 55 | 2 | Dongwon | Kim Namjeong | 23 | 26 | 8.9 | 8.6 | publicly disclosed corporate group[b] |
| 58 | 59 | 1 | Amoraepacific | Suh Kyung-bae | 15 | 13 | 8.7 | 8.4 | publicly disclosed corporate group[b] |
| 59 | 50 | 9 | Taekwang | Lee Ho-jin | 20 | 20 | 8.7 | 8.4 | publicly disclosed corporate group[b] |
| 60 | 64 | 4 | Krafton | Chang Byung-gyu | 9 | 8 | 8.5 | 8.3 | publicly disclosed corporate group[b] |
| 61 | 70 | 9 | Global Sae-A Group | Woonggi Kim | 23 | 20 | 8.3 | 8 | publicly disclosed corporate group[b] |
| 62 | 61 | 1 | KAI | KAI | 4 | 4 | 8.1 | 7.9 | publicly disclosed corporate group[b] |
| 63 | 63 | | MDM | Moon Joo-hyun | 19 | 15 | 8 | 7.8 | publicly disclosed corporate group[b] |
| 64 | 86 | 22 | Sono international | Park Chun-hee | 25 | 23 | 7.4 | 7.2 | publicly disclosed corporate group[b] |
| 65 | 62 | 3 | Aekyung | Jang Young-shin | 30 | 31 | 7.3 | 7.1 | publicly disclosed corporate group[b] |
| 66 | 67 | 1 | Dongkuk | Jang Se-ju | 16 | 12 | 7.3 | 7.1 | publicly disclosed corporate group[b] |
| 67 | 66 | 1 | BS | Lee Ki-seung | 66 | 65 | 7.3 | 7 | publicly disclosed corporate group[b] |
| 68 | 65 | 3 | Samyang | Kim Yun | 13 | 13 | 7.1 | 6.9 | publicly disclosed corporate group[b] |
| 69 | - | New | LIG | Koo Bon-sang | 18 | - | 7.1 | 6.9 | publicly disclosed corporate group[b] |
| 70 | 69 | 1 | Joongang | Hong Seok-hyun | 57 | 54 | 6.9 | 6.7 | publicly disclosed corporate group[b] |
| 71 | 72 | 1 | Eugene | Yoo Kyung-seon | 63 | 60 | 6.8 | 6.6 | publicly disclosed corporate group[b] |
| 72 | 75 | 3 | Korea HC | Park Jeong-seok | 26 | 24 | 6.7 | 6.5 | publicly disclosed corporate group[b] |
| 73 | 77 | 4 | BGF | Hong Seok-jo | 19 | 18 | 6.3 | 6.1 | publicly disclosed corporate group[b] |
| 74 | - | New | Daekwang | Cho Young-hoon | 64 | - | 6.1 | 5.9 | publicly disclosed corporate group[b] |
| 75 | 83 | 8 | Bando | Kwon Hong-sa | 15 | 18 | 6.1 | 5.9 | publicly disclosed corporate group[b] |
| 76 | 78 | 2 | Dashin | Yang Hong-seok | 84 | 117 | 6 | 5.9 | publicly disclosed corporate group[b] |
| 77 | 76 | 1 | Okay | Choi Yun | 16 | 16 | 5.8 | 5.6 | publicly disclosed corporate group[b] |
| 78 | 79 | 1 | HiteJinro | Park Mun-deok | 12 | 11 | 5.7 | 5.6 | publicly disclosed corporate group[b] |
| 79 | 80 | 1 | Nongshim | Shin Dong-won | 22 | 23 | 5.6 | 5.5 | publicly disclosed corporate group[b] |
| 80 | 74 | 6 | DN | Kim Sang-heon | 7 | 8 | 5.6 | 5.5 | publicly disclosed corporate group[b] |
| 81 | 68 | 13 | Hyundai Marine & Fire Insurance | Jeong Mong-yoon | 14 | 13 | 5.6 | 5.4 | publicly disclosed corporate group[b] |
| 82 | 81 | 1 | Shinyoung | Jeong Chun-bo | 32 | 33 | 5.6 | 5.4 | publicly disclosed corporate group[b] |
| 83 | 88 | 5 | Paradise | Jeon Philip | 11 | 14 | 5.4 | 5.3 | publicly disclosed corporate group[b] |
| 84 | 71 | 13 | IS | Gwon Hyuk-woon | 32 | 36 | 5.4 | 5.2 | publicly disclosed corporate group[b] |
| 85 | 85 | | Hybe | Bang Si-hyuk | 12 | 15 | 5.4 | 5.2 | publicly disclosed corporate group[b] |
| 86 | 82 | 4 | Hansol | Jo Dong-gil | 21 | 21 | 5.4 | 5.2 | publicly disclosed corporate group[b] |
| 87 | 84 | 3 | Sampyo | Jeong Do-won | 28 | 33 | 5.3 | 5.2 | publicly disclosed corporate group[b] |
| 88 | - | New | Sajo | Joo Jin-woo | 40 | - | 5.3 | 5.1 | publicly disclosed corporate group[b] |
| 89 | 87 | 2 | Wonik | Lee Young-han | 47 | 54 | 5.3 | 5.1 | publicly disclosed corporate group[b] |
| 90 | - | New | Bithumb | Lee Jeong-hoon | 20 | - | 5.2 | 5.1 | publicly disclosed corporate group[b] |
| 91 | - | New | EUKOR | EUKOR | 2 | - | 5.1 | 5 | publicly disclosed corporate group[b] |
| 92 | 73 | 19 | Youngone | Sung Gi-hak | 20 | 50 | 5 | 4.9 | publicly disclosed corporate group[b] |
| - | - | Excluded | Kumho Asiana | Park Sam-gu | - | 24 | - | 17.4 | publicly disclosed corporate group[b] |
Some chaebols are one largecorporation 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'skeiretsu business groupings, the successors of the pre-warzaibatsu, but they have some major differences:[according to whom?]
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 or four public companies, which control other companies that in turn control subsidiaries. A good example of this practice would be the owner ofDoosan, who controlled more than 20 subsidiaries with only minor participation in about 5 companies.[20]
The chairman of a typical chaebol possesses a small portion of the 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 owns0.5% of the group's listed firms. This demonstrates a weakness in the rule of law.[4] 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.[21]
The typical culture of a chaebol is highly paternalistic. Much of the environment is defined by the chairman who acts as a "fatherly figure" to his subordinates. This can be traced back toNeo-Confucian values that permeate Korean society.[citation needed] A chaebol head's demeanour 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, to appease their superiors.[22] Company outings and drinking sessions tend to be compulsory to foster a sense of family and belonging among employees. Employers believe that enhancing a common bond between them will 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.[citation needed]
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, theAsiana 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.[23] Promotion is rarely merit-based. Rather, it is through the 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 to resign. 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.[22]
The origins of the modern chaebol system in South Korea came as a consequence of theKorean 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 the requirements of the United Nations forces for the Korean currency,[clarification needed] 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.[24] Many companies that were not in the circle of businesses saw the system as flawed and corrupted.[4] Corruption scandals have occurred periodically in all chaebols. Such incidents suggest a form of "crony capitalism" which is common in developing countries.
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 effectively and efficiently.[4] In other words, there was no external monitoring system to monitor chaebols and ensure that they were efficient in the allocation of resources.[25] 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".[26] 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 their deficits, and before the1997 Asian financial crisis, huge debts had accumulated, many of which were hidden. That gave the illusion that the system was flourishing into the 1990s.[4]
According to the Defense Language Institute Foreign Language Center, the majority of South Korea's economy is driven by exports.[27] 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.[28] 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 that 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 to have higher personal financial gain.[28] 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. However, a study published in the Journal of the Japanese and International Economies found that after the 1997 Asian financial crisis, foreign investment behavioural 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.[29] As of January 2025, many Chaebol corporations have a high share of foreign investors, with Samsung Electronics at73%,[30] Hyundai Motors at50%,[30] and SK Hynics at55.8%.[31] Nonetheless, chaebols are still able to survive, highlighting just how much power and aid they receive from the Korean government.
During the1997 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 into a chain reaction.[4] 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.[32]
Since the crisis, chaebols had less debt and were less vulnerable to similar crises, as was demonstrated in the 2008 crisis. With the growth of the fewer remaining chaebols, however, each of them occupies a larger portion of the economy, with the largest chaebols making up (by sales revenue) a substantial portion of South Korea's GDP.[33][34][35]
Theprotectionist policies andpreferable government treatment granted chaebols the ability to exhibit monopolistic behaviour. The absence of a market free of intervention meant that "true competition" became a rarity in South Korea. Especially in the era before the1997 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 toward entrepreneurship. The intensity and extent of market concentration became evident as80% of the country's GDP is derived from chaebols. The largest of the group, Samsung, exports20% of South Korea's goods and services alone. Although no longer financially supported by the government, these firms have attainedeconomies 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 trend to scale globally has increased among aspiring Korean entrepreneurs.[36] Conversely, chaebols have also been moving money abroad with the tacit endorsement of the South Korean government and investing in commercial enterprises, particularly inKoreatownManhattan,New York City.[37]
To this day, chaebols maintain dominance across all industries. Reductions intariffs and the removal of trade regulations designed to protect Korean conglomerates have led to increased 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 theKorean Stock Exchange are designated as chaebols,[22] and despite chaebols only accounting for just over 10 per cent of the country's workers, the four largest chaebols hold 70 per cent of total market capitalization, and all chaebols together holding 77 per cent as of the late 2010s.[38] 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.[22] For instance, in 2012Samsung andLG Electronics were fined for colluding to raise prices for home appliances.[39]
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 PresidentKim Dae-Jung, have cracked down on kickbacks and preferential treatment. Moreover, the state is no longer a majority shareholder of any chaebol.[22] But their sheer size and wealth have been used to gain influence. For the most part, the government sees the function of chaebols as crucial to the Korean economy. When PresidentLee Myung-Bak took office, he pardonedSamsung Group chairmanLee Kun-Hee fortax evasion. President Lee then proceeded to champion pro-chaebol deals, including a nuclear energy contract with the city ofAbu Dhabi, and loosened laws preventing the conglomerates from owning financial services companies.[40] Samsung's leader is not the only chaebol chairman to be excused from a criminal conviction.Choi Tae-Won ofSK Group,Chung Mong-Koo ofHyundai, Kim Seung-Youn of Hanwha, andShin Dong-bin of Lotte[41] 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.[42] Typically chaebol chairmen are pardoned of any crimes. 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.[43]
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 favourable treatment to the donor firm.[44] Examples of this type of corruption were widespread in the years leading up to the 1997 Asian 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 a bending of regulation in favour of these problematic firms. For example, in the 1990s, Hanbo Group, formerly South Korea's second-largest steel-maker, 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.[44] This was under the claim that to be a competitive economy more power must be given to the chaebols. In recent years, the leading political parties of South Korea have shifted their focus from supporting large corporations to promoting economic diversification.
Different reforms have been proposed or enacted to deal with the influence, power, and corruption associated with the chaebols, though it has been questioned whether real reform is possible.[45]
UnderKim Dae-Jung and after the1997 Asian financial crisis, many reforms were made to the chaebols. Most of these changes pertained to corporate structure, transparency in financial reporting, cuts in government subsidies, corporate governance, and debt stabilization.[46] In 1997, theIMF provided a bailout loan of $60 billion conditional on revision.[22] 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 which led to over-leveraged balance sheets.[47] 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 regularly.[44] The IMF agreement brought about the following changes. First, the authority to establish and implement accounting standards, previously centered on financial supervisory authorities and the government, was transferred to a private, independent organization.[48] Second, the adoption of International Financial Reporting Standards (IFRS). Adapted to the domestic context, these standards were adopted as K-IFRS, which was selectively applied starting in 2009 and then expanded to include listed companies and others in 2011, gradually expanding their application. This brought about changes that enhanced the international comparability of financial information and the accuracy of disclosure.[49] Third, the external audit and disclosure system was strengthened. The revision of the External Audit Act mandated consolidated financial statements, introduced provisions related to internal accounting management, and expanded auditors' responsibility for internal accounting audits.[50] To overcome the chaebol-dominated oligarchy, the accounting and disclosure improvements introduced by the IMF agreement primarily reduced information asymmetry and strengthened external oversight. As accounting and disclosure standards were standardized, investors, creditors, and regulators were able to more accurately assess a company's financial status, which increased market surveillance pressure on insiders.[51] Furthermore, the strengthened disclosure requirements for corporate transactions made it easier for external parties to verify abnormal transactions within the group, reducing incentives for insider-only (tunneling) activities. Finally, accurate accounting information helped supervisory agencies like the Financial Supervisory Service identify links between insolvent companies and affiliates, thereby weakening collusion between politics and business.[52]
Kim Dae-Jung enacted what is known as the "Five Principles of Corporate Governance".[47] 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 was to be below200%. 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.[44] 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 the2008 financial crisis, many of these reforms ensured chaebols' quick recovery.[47] 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.[44] President Kim Dae-jung's five principles of corporate governance had several impacts on mitigating the chaebol oligarchy. First, they enhanced management transparency. Strengthening the board of directors and auditing functions, along with defining management accountability, could provide institutional restraints against the autocracy of the owner family. Second, they established a professional management system. The five principles of corporate governance created pressure to limit the direct management of the owner family and expand the decision-making power of professional managers. This can be seen in President Kim Dae-jung's strong insistence that Korean Air be transformed into a professional management system.[53] This professional management system effectively limited the personal power of chaebol leaders, i.e., their political and economic oligarchy.[54] Furthermore, the ban on cross-subsidy guarantees between affiliates and the strengthened disclosure of related-party transactions weakened the political and financial safeguards against excessive leverage by chaebols.[55]
PresidentRoh Moo Hyun pushed for even more extensive reform.[47] 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 that 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.[22] The Roh Moo-hyun administration also took steps to strengthen oversight and enhance transparency of corporations and chaebols. Specifically, it revised the Monopoly Regulation and Fair Trade Act (the Monopoly Regulation and Fair Trade Act). It also enacted the Securities Class Action Act. Furthermore, it revised the Inheritance Tax and Gift Tax Acts, demonstrating efforts to improve the governance, investment structure, and disclosure practices of chaebols. However, some argue that the pace of reform slowed in the latter half of his term, and the total investment limit system was never fully implemented.[56]
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Somecompetition laws were passed to attempt to limit the expansion of chaebol:
During the government-led growth process, a structure emerged in which industrial capital, such as conglomerates, owned or controlled financial companies, posing a risk of industrial capital dominating finance.[57]This could lead to affiliate-centered internal transactions, low-interest loans, and preferential lending, further expanding the economic power and capital control of a small number of conglomerates. In essence, this would lead to an oligarchy-like governance structure centered on conglomerates, which could threaten the soundness of the entire financial system.[58]To prevent this, the Financial and Industrial Separation Act was introduced to separate financial and industrial capital. This system began to be institutionalized in Korea in the 1980s, restricting industrial capital from owning a certain percentage of bank shares. Since then, the Financial Holding Companies Act and the Monopoly Regulation and Fair Trade Act have developed institutional frameworks to restrict industrial capital's control over financial companies and financial capital's control over industrial capital. Recent discussions are examining strengthening measures, such as the separation of financial affiliates and stock ownership restrictions for general and financial holding companies. These regulations on the separation of finance and industry have served to institutionally control the internal capital transfers, low-cost lending, and unfair support for affiliates that arise from the ownership and control of financial companies by conglomerates through industrial capital. These regulations have also served to limit the oligarchic structure in which conglomerates use financial companies as their private vaults to simultaneously expand their economic and political power.[59]
The Investment Limit Act is more accurately known as the Total Investment Limit System. Korean conglomerates have created a structure in which minority owners and controlling shareholders control numerous affiliates with relatively small stakes through circular investment among affiliates, expanded equity investment, and a control structure through investment. This was recognized as an oligarchic concentration of economic power and a chain reaction of risks across the entire group. The Total Investment Limit System was introduced as an institutional mechanism to control this structural risk.[60]This system was first introduced through the amendment to the Monopoly Regulation and Fair Trade Act in December 1986 and went into effect in April 1987. The core provision of the Act is a ceiling provision that prohibits companies belonging to large conglomerates from using more than a certain percentage of their net assets for equity investments in other domestic companies. This provision was later abolished in 1998 due to concerns about its effectiveness and changing economic conditions, but was reintroduced in 1999.[61]Opinions are divided on the effectiveness of the system in alleviating oligarchy. Some argue that excessive investment by large conglomerates is gradually being curbed, with the investment-to-net-asset ratio approaching 25%. However, others argue that it is difficult to assess the improvement in investment behavior, as there are instances of intensified circular investment among affiliates.[62]
The correct name for the Guarantee Limit Act is the "Debt Guarantee Limit System." Debt guarantees and cross-guarantees among affiliates of Korean conglomerates were feared to pose risks to financial supervision and the concentration of economic power. To prevent this, the Debt Guarantee Limit System was introduced.[63]Article 24 of the Monopoly Regulation and Fair Trade Act stipulates, "Domestic companies belonging to conglomerates subject to cross-shareholding restrictions shall not guarantee the debt of their affiliates."[64]However, this prohibits "inter-affiliate debt guarantees" for conglomerates with a certain total asset value. For example, this applies to groups with total assets exceeding 5 trillion won. This system served to institutionally control the mechanism by which conglomerates, through guarantees between affiliates, transferred internal funds and shared risks across the entire group, thereby strengthening the concentration of economic power. Indeed, since the system's introduction in 1998, the amount of inter-affiliate debt guarantees within conglomerates subject to cross-shareholding restrictions has steadily declined. Previously, conglomerates provided low-interest guarantees to their affiliates, which in turn formed a circulating capital network for the entire conglomerate. Therefore, this system served as an institutional mechanism to weaken the oligarchic control established by a small number of conglomerate owners through guarantees and investment networks between affiliates.[65]
Formally, theKorea Fair Trade Commission announces a limited chaebol list every year by size of industrial assets (not including financial companies).[66]
| Year | Chaebols | Affiliates | Assets |
|---|---|---|---|
| 2007 | 62 | 1,196 Ent | 979.7 trillion won (Not including bank and financial group by South Korean law) |
| 2008 | 79 | 1,680 Ent | 1,161.5 trillion won (more than 2 trillion won) |
| 2009 | 48 | 1,137 Ent | 1,310.6 trillion won (more than 5 trillion won) |
| Samsung Group's total assets are 317 trillion won, but the FTC recognizes only 174 trillionwon, which excludes financial subsidiaries. | |||
The following tables list chaebols by category.
| Group | Number of affiliates | Major businesses |
|---|---|---|
| Samsung Group | 60 | Electronics, semiconductors, batteries, IT Solutions, construction, shipbuilding, insurance |
| SK Group | 186 | Energy, chemicals, telecom, semiconductors, batteries, trading, biopharmaceuticals |
| Hyundai Motor Group | 57 | Automobiles, auto parts, steel, construction, logistics, credit card |
| LG | 73 | Electronics, batteries, chemicals, telecom, display, food, cosmetics |
| Lotte Group | 85 | Retail, food, entertainment, hotels, chemicals, construction, tourism |
| Hanwha Group | 91 | Explosives, aerospace, energy, insurance, chemicals, hotels, construction |
| GS Group | 93 | Energy, retail, hotels, construction, trading |
| Hyundai Heavy Industries Group | 36 | Shipbuilding, engineering, heavy industries, construction equipment, energy, robotics |
| Shinsegae Group | 53 | Retail, food, hotels, entertainment, fashion |
| CJ Group | 85 | Food, retail, logistics, biopharmaceuticals, entertainment |
| Hanjin Group | 33 | Aviation, logistics, transportation, hotels, info systems, airports |
Like many other conglomerates across the world, Korean chaebols have a presence in popular media. There are a large number ofK-dramas that feature chaebols and chaebol family members. Some of these shows, includingA Business Proposal,Coffee Prince,What's Wrong with Secretary Kim,King the Land, andThe Heirs, depict chaebol family members being competent and attractive. Other dramas, however, depict chaebol family members being materialistic and arrogant, includingInnocent Defendant,Remember,Vincenzo,Reborn Rich, andBig Mouth, reflecting the massive income inequality and political corruption related to chaebols in South Korea.
In addition, many chaebol family members have taken tosocial media outlets likeInstagram andTwitter, where they publish snippets of their personal lives. Some chaebols also partake in popular social media trends likemukbangs, as seen onHam Yon-Ji'sYouTube channel, 햄연지 YONJIHAM. Some have suggested that these attempts at humanizing chaebols are purely financial strategies.[67]
This article incorporates text from this source, which is in thepublic domain. Savada, Andrea Matles, ed. (1992).South Korea: A Country Study (4th ed.). Washington: Federal Research Division, Library of Congress.ISBN 0-8444-0736-4.Most mom-and-pops are gone, and 32nd Street is now dominated by chains due to high rents and policies in Korea itself.
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