Journal of Law, Finance, and Accounting > Vol 6 > Issue 2

Regulatory Measures to Dismantle Pyramidal Business Groups: Evidence from the United States, Japan, Korea, and Israel

Assaf Hamdani, The Buchmann Faculty of Law and Coller School of Management, Tel Aviv University, Israel, and European Corporate Governance Institute (ECGI), Belgium, , Konstantin Kosenko, Bank of Israel, Israel, , Yishay Yafeh, School of Business Administration, Hebrew University of Jerusalem, Israel, Center for Economic Policy Research (CEPR), USA, and European Corporate Governance Institute (ECGI), Belgium,
Suggested Citation
Assaf Hamdani, Konstantin Kosenko and Yishay Yafeh (2021), "Regulatory Measures to Dismantle Pyramidal Business Groups: Evidence from the United States, Japan, Korea, and Israel", Journal of Law, Finance, and Accounting: Vol. 6: No. 2, pp 221-261.

Publication Date: 08 Nov 2021
© 2021 A. Hamdani, K. Kosenko, and Y. Yafeh
Strategic management,  Corporate finance,  Corporate governance,  Law and economics,  Comparative political economy,  Regulation
JEL Codes: G38, K22, N20
Business groupspyramidscorporate governancecontrolling shareholdersconcentration of economic power


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In this article:
1. Introduction 
2. Business Groups – A Primer 
3. Anti-Pyramid Policies in the United States (Starting Around 1935) 
4. Japan during the Postwar American Occupation Reforms 
5. Korea in the Aftermath of the East Asian Financial Crisis 
6. Israel, 2012–2019 
7. Conclusions 


Large business enterprises, from the railroad barons of nineteenth century America to Amazon and Google today, are often perceived as important for economic development and, at the same time, as potential threats to competition and even democracy. In this study, we compare the experiences of four countries that implemented policies to curb the influence of one type of large corporate entities – pyramidal business groups: The US in the 1930s; Japan during the American occupation (1945–1952); Korea following the Asian crisis (late 1990s); and Israel in the last decade (2010–2019). Novel regulatory measures, applied consistently in the US and Japan, where the extreme political circumstances were very favorable to economic reform, led to the demise of pyramidal business groups in these countries. Israel, where the reforms did not follow a severe crisis, also used specifically-designed regulatory tools over a decade-long period, resulting in a significant decline in the number and size of business groups. Korea, after experimenting with variety of regulatory measures, chose to rely primarily on corporate governance-focused reforms to curb the influence of the chaebol, but with limited effects; groups continue to dominate the Korean economy. Our findings point to the importance of specificallydesigned regulatory tools, applied consistently over time, against the backdrop of a pro-reform political climate.