The heart of Seoul is home to a dense concentration of leading conglomerates, reflecting the city’s status as South Korea’s economic powerhouse. (Image courtesy of Yonhap)
SEOUL, July 16 (Korea Bizwire) — The share of intra-group transactions among South Korea’s major conglomerates rose sharply in 2023, with nearly 40 percent of their total domestic revenue derived from internal dealings, raising fresh concerns about potential abuses of market power and opaque business practices.
According to a report released Monday by corporate research firm Leaders Index, internal transactions accounted for 37.5 percent of the total 1,947 trillion won ($1.4 trillion) in sales generated by 3,276 affiliates across 81 business groups headed by individual owners. That figure marks a 3.6 percentage point increase from 2022.
Of particular note, eight firms reported 100 percent of their revenue came from internal dealings. These include OK Data System of OK Financial Group, Siren and Ilwoo Farm of Sajo Group, and OnGuard of Bithumb Group. An additional 20 affiliates posted internal transaction ratios exceeding 80 percent.
While intra-group trading is not illegal in itself, it becomes problematic when chaebol owner families — who hold direct or indirect stakes of 20 percent or more (30 percent for listed companies) — use such arrangements to funnel profits and secure control, triggering potential regulatory scrutiny.
The study found that affiliates owned by controlling families had a higher-than-average internal transaction ratio of 39 percent, up 1.5 percentage points from the previous year.
Among the groups with the highest internal trading volumes, Daebang Construction topped the list at 65.9 percent, up a staggering 23.4 points from the previous year. SK Group (55.3%), HD Hyundai (43.6%), Ecopro Group (41.8%), and Hyundai Motor Group (37.9%) followed.
The findings come amid growing public scrutiny of large conglomerates’ governance and calls for greater transparency. Regulators continue to monitor for potential “unfair support” schemes that could distort competition and undermine minority shareholders.
M. H. Lee (mhlee@koreabizwire.com)
