[THE INVESTOR] Subsidiaries of family-owned conglomerates in South Korea run by the third-generation owners have a higher ratio of internal trading to sales than firms owned by their parents, a market tracker said on Oct. 26.

The portion is much higher at unlisted units of chaebol, which is seen as aimed at helping third-generation owners cement control over the business empires by giving lucrative contracts to their companies.

In an analysis of listed chaebol companies in which owner families own 20 percent or more (30 percent for unlisted firms), CEO Score said subsidiaries where third-generation family members hold higher stakes rely on inter-affiliate trading for 20.4 percent of their sales as of end-June. The figure is nearly double the 10.7 percent for companies controlled by their families.

The dependence ratio stood at 25.5 percent for unlisted firms controlled by third-generation scions with the comparable figure coming to 7.4 percent for units dominated by their parents.

The dependence on inter-subsidiary trading was the highest in Hanjin Group units controlled by third-generation family members, followed by Taekwang, Hankook Tire, Doosan and Hanwha, according to CEO score.

(theinvestor@heraldcorp.com)