The buildings of South Korea’s major firms in Seoul. (Yonhap)
SEOUL, Nov. 3 (Korea Bizwire) – The higher the operating profit is for large-sized companies, the less it is for smaller subcontractors, a recent study revealed.
The Korea Institute of Public Finance announced Monday the analysis of performance among subcontractors working with conglomerates based on data from 2013 and 2014 provided by Nice Information Service and the Korea Development Institute .
The report showed that increasing sales and total assets for conglomerates also raised sales and total assets for smaller subcontractors.
In contrast, increasing operating profits for conglomerates led to a reduction in operating profit for subcontractors.
A 1 trillion won (US$880 million) increase in sales for conglomerates led to a 300 million won (US$264,000) increase in sales for subcontractors.
On the other hand, a 1 trillion won increase in total assets for conglomerates led to a 100 million won increase in total assets for subcontractors.
However, a 1 trillion won increase in operating profit for conglomerates led to a 100 million won decrease in total assets for subcontractors.
“It is difficult to verify that the trickle-down effect is at work in the current structure of subcontract practices,” said Jang Woo-hyun, author of the report. “The study has unveiled a result of great concern for subcontractors.”
H. M. Kang (hmkang@koreabizwire.com)
