Premium
Family Control and Expropriation at Not‐for‐Profit Organizations: Evidence from Korean Private Universities
Author(s) -
Bae KeeHong,
Kim SeungBo,
Kim Woochan
Publication year - 2012
Publication title -
corporate governance: an international review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.866
H-Index - 85
eISSN - 1467-8683
pISSN - 0964-8410
DOI - 10.1111/j.1467-8683.2012.00922.x
Subject(s) - expropriation , control (management) , donation , business , agency (philosophy) , empirical research , public relations , accounting , marketing , political science , economics , sociology , economic growth , management , market economy , social science , philosophy , epistemology
Abstract Manuscript Type Empirical Research Question/Issue We study an agency problem in private universities – the conflict between controlling families and other stakeholders. We investigate whether universities over which controlling families have disproportionately significant power relative to the amount of funds they contribute, that is, universities with high expropriation risk, are associated with lower outside donations and poor quality. Research Findings/Insights Using a sample of Korean private universities, we find that measures of family control in excess of monetary contributions are negatively related to the level of outside donation and measures of university quality. We also find that universities at which the controlling family exerts disproportionate control are more likely to face disputes between the controlling family and other stakeholders. Finally, we show that our results are not driven by reverse causality. Theoretical/Academic Implications While the existing literature on not‐for‐profit organizations focuses on the conflict between professional managers and other stakeholders, we study the conflict between controlling families and other stakeholders. We investigate a situation in which the controlling family expropriates other stakeholders, a topic missing from the existing not‐for‐profit literature. Practitioner/Policy Implications This study offers insights to policymakers interested in creating private universities in an emerging market setting. The relevance of our results is not limited to K orea. According to A ltbach, family control of private universities is prevalent in a number of countries, including M exico, T hailand, T aiwan, J apan, K orea, the P hilippines, A rgentina, I ndia, and C hina.