ABSTRACT
This chapter provides the strengths and weaknesses of existing theories that attempt to explain the rise and change of the chaebol and keiretsu organizations. The role of keiretsu top managers remains equally puzzling to that of the chaebol owners. Just as the chaebol owners, who own less than 4% of chaebol stocks in the mid-1990s, keiretsu top managers own few stocks of their own. Indeed, many writers of the chaebol argue that the state credit policies in Korea were critical in shaping the chaebol, especially its financial structure of high levels of indirect financing, external funding, and debt-to-equity ratios. Chaebols’ efforts at diversifying loan sources clearly indicate that diversification was somehow necessary to bypass the state banks and domestic curb markets. The organizational variable of the regulation structure does not explain the rise of the chaebol organization. The adoption of an existing organizational structure occurs when uncertainties are low.
