By Yoon Ja-young
The nation's top 10 conglomerates are sitting on record cash reserves despite the government's pressure on them to share their profits through dividends and investment.
According to chaebul.com, a conglomerate research firm, the combined internal reserves of the country's top 10 conglomerates increased by nearly 40 trillion won last year, surpassing 500 trillion won.
Samsung Group posted the largest internal reserves, while Lotte Group posted the highest ratio of reserves to paid-in capital.
By company, SK Telecom posted the highest reserve-to-capital ratio, exceeding 30,000 percent.
Chaebul.com compiled the internal reserves of 96 listed subsidiaries of the country's top 10 conglomerates. The total stood at 503.9 trillion won as of the end of 2014, which is 37.6 trillion won more, or up 8.1 percent, from the previous year. The internal reserve comprises profit reserves and capital surplus, including the cash piled up internally after giving dividends and bonuses, among other allocations.
The government had adopted a tax on excess cash reserves held by big corporations, while providing incentives for those using them for dividend payouts, wage increases or investments, hoping to boost the economy through the increase of household income and spending. It was based on the criticism that the country's business sector is monopolizing the gains of economic growth.
Despite the government policy, the internal reserve ratio, or the ratio of internal reserves to paid-in capital, soared to 1,327.1 percent last year from 1,257.6 percent the year before.
Among the conglomerates, Lotte Group had the highest ratio at 4,773.6 percent, up 144.5 percentage points from a year ago. The group's total reserves stand at 27.9 trillion won.
Samsung Group's 18 listed subsidiaries in the survey posted 196.7 trillion won in combined cash, up 11.7 percent from a year ago. Its reserve ratio reached 3,494.9 percent.
Hyundai Automotive Group's 11 listed units had reserves of 102 trillion won, up 10.9 percent from a year earlier. Its ratio stood at 1,654 percent, up 161 percentage points from the previous year.
POSCO Group and Hyundai Heavy Industries Group saw their ratios fall because of either merger and acquisition activities or worsening profitability.
Among the subsidiaries, SK Telecom had the record-high reserve ratio of 30,087 percent. Samsung Fire and Marine Insurance, Lotte Chilsung Beverage and Lotte Confectionery also had ratios higher than 20,000 percent.
Kim Yun-kyung, a research fellow at the Korea Economic Research Institute, said the increase in cash-like assets is seen not only with Korean conglomerates but also with other global companies.
"Unless businesses pay dividends bigger than their net profit, the internal reserve and the reserve ratio will rise each year as long as profitable corporate activity continues," she said.
Regarding taxation on the reserves, she said businesses can regard it as "a corporate tax hike, which means a deterioration in corporate business conditions.
"The businesses may be prompted to relocate overseas," she added.
The nation's top 10 conglomerates are sitting on record cash reserves despite the government's pressure on them to share their profits through dividends and investment.
According to chaebul.com, a conglomerate research firm, the combined internal reserves of the country's top 10 conglomerates increased by nearly 40 trillion won last year, surpassing 500 trillion won.
Samsung Group posted the largest internal reserves, while Lotte Group posted the highest ratio of reserves to paid-in capital.
By company, SK Telecom posted the highest reserve-to-capital ratio, exceeding 30,000 percent.
Chaebul.com compiled the internal reserves of 96 listed subsidiaries of the country's top 10 conglomerates. The total stood at 503.9 trillion won as of the end of 2014, which is 37.6 trillion won more, or up 8.1 percent, from the previous year. The internal reserve comprises profit reserves and capital surplus, including the cash piled up internally after giving dividends and bonuses, among other allocations.
The government had adopted a tax on excess cash reserves held by big corporations, while providing incentives for those using them for dividend payouts, wage increases or investments, hoping to boost the economy through the increase of household income and spending. It was based on the criticism that the country's business sector is monopolizing the gains of economic growth.
Despite the government policy, the internal reserve ratio, or the ratio of internal reserves to paid-in capital, soared to 1,327.1 percent last year from 1,257.6 percent the year before.
Among the conglomerates, Lotte Group had the highest ratio at 4,773.6 percent, up 144.5 percentage points from a year ago. The group's total reserves stand at 27.9 trillion won.
Samsung Group's 18 listed subsidiaries in the survey posted 196.7 trillion won in combined cash, up 11.7 percent from a year ago. Its reserve ratio reached 3,494.9 percent.
Hyundai Automotive Group's 11 listed units had reserves of 102 trillion won, up 10.9 percent from a year earlier. Its ratio stood at 1,654 percent, up 161 percentage points from the previous year.
POSCO Group and Hyundai Heavy Industries Group saw their ratios fall because of either merger and acquisition activities or worsening profitability.
Among the subsidiaries, SK Telecom had the record-high reserve ratio of 30,087 percent. Samsung Fire and Marine Insurance, Lotte Chilsung Beverage and Lotte Confectionery also had ratios higher than 20,000 percent.
Kim Yun-kyung, a research fellow at the Korea Economic Research Institute, said the increase in cash-like assets is seen not only with Korean conglomerates but also with other global companies.
"Unless businesses pay dividends bigger than their net profit, the internal reserve and the reserve ratio will rise each year as long as profitable corporate activity continues," she said.
Regarding taxation on the reserves, she said businesses can regard it as "a corporate tax hike, which means a deterioration in corporate business conditions.
"The businesses may be prompted to relocate overseas," she added.
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