1. Key Elements of Thesis: Dec. 17, 2015
Workshop Thesis 1
Key Elements of Thesis: Dec. 17, 2015

2. Introduction
Key elements of thesis should be addressed in introduction.
Purpose: What will your thesis do? (Research Questions)
The purpose of your thesis is to answer to research questions.
Your whole paper aims to answer to the research questions.
Motivation or Background of your thesis: Why is your research topic important?
You should persuade academic readers (or policy makers) to understand why your research topic is important. Why should readers read your thesis?

3. Introduction
3. Contributions and literature review (Differentiation from existing papers)
Brief academic literature review is usually required to show your motivation or (and) contribution.
By differentiating yours from others’, you can highlight your contribution and its importance.
Why should people read yours instead of others’?
4. (Sometimes research methods or data are mentioned if necessary.)
5. Structure of Paper

4. Key Elements of Thesis in Introduction
Purpose
What is the purpose of your thesis?
What are your research questions?
Clarify what you will do in your thesis.
To examine the effect of incomes of Korean households on their consumption.
To review privatization experiences of Eastern Europe and infer some lessons for North Korea in case of Korean reunification.
To examine whether financial crisis can be predicted by a ratio analysis of financial and income statements.
To examine effects of dividend changes on stock prices.

5. Case 1 (Purpose)
“Agency problems and performance of Korean companies during the Asian financial crisis: Chaebol vs. non-chaebol firms”, (Byungmo Kim, Inmoo Lee, 2003)
Two purposes (second paragraph)
To examine whether agency problems explain the performance of Korean companies during the Asian financial crisis
Examine not only agency problems between insiders (managers or controlling shareholders) and outside minority shareholders but also agency problems between shareholders and bondholders.
To examine whether agency problem explain the performance differently for chaebol vs. non-chaebol.
Is this research topic important? Motivation
Agency problem
Agency problem during the Asian financial crisis (related to research purpose)

6. Key Elements of Thesis Motivation
What motivates you to study specific topics in your thesis?
Is your research topic important?
Who are your readers for your thesis?
Why did your organization send you to study here?
What does GSP expect you to study here?
Is your research topic academically interesting?
Hypothesis or Theory - Test hypothesis
Or is your research topic practically interesting?
Knowledge and experience of Korean economic development

7. Motivation (Case 1)
First paragraph: ‘Agency problem’ is an important issue in Korea.
Major reason for ‘Korean discount’ is due to poor corporate governance.
Korean companies’ market values are less than comparable firms’ in other capital markets due to the poor corporate governance system in Korea (Global money managers say that --- )
Evidence of poor corporate governance: 1) Johnson et al. (2000) show that Korea has relatively low scores in their measures of corporate governance among emerging market countries.
Korean companies are more likely to be subject to various agency problems.

8. 1. More Specific Motivation for Research Purpose
Why does it make sense (important or interesting) to examine the agency problem particularly during the Asian financial crisis?
The paper directly explains why research purpose is important or interesting particularly during the Asian financial crisis.
Agency problems become more serious when the companies fall into the financial distress.
Jensen and Meckling (1976): Agency problems between shareholders and bondholders
Johnson et al. (2000) argue that managers are more likely to expropriate minority shareholders during a crisis and they show that countries with weak corporate governance have experienced a larger fall in asset prices during the Asian financial crisis.
Rajan and Zingales (1998): Investors are more likely to pay attention to corporate governance during a crisis.

9. 2. More Specific Motivation for Research Purpose
Why is it worthwhile to study any difference between chaebol firms and non-chaebol firms?
Joh (2003) shows that the difference between control rights and ownership rights is much bigger for chaebol firms, especially large chaebol firms than non-chaebol firms. Chaebol firms who can almost full control over the all the member firms, they can easily expropriate minority shareholders for their own benefits.
Bae et al. (2002) present evidence that chaebol firms on average make acquisition decisions for chaebol owners’ personal interests, not for the shareholders’ interests.
Chaebol firms may have more serious agency problems that result in their poor performance during a crisis.

10. Key Elements of Thesis in Introduction
Contribution is the most important element of an academic paper.
What is the value of your paper?
There may be many papers related to your research topic.
If then, why should readers read your paper?
Compared to other papers, what is unique in your paper?
Example
Simple summary of existing papers can not be accepted as an academic paper or thesis.
It is valuable to readers who do not have enough time to read all existing papers.
However, since there is no unique value, it is a report, not an academic paper.

11. Contribution A survey paper can be an academic paper.
It should add something such as new insightful value.
Example: Fama’s survey paper about efficient market hypothesis
Many academicians published papers that test the efficient market hypothesis.
The efficient market hypothesis means that securities are fairly priced.
Fama classified existing studies about the efficient market hypothesis based on quality of information.
Weak-form efficient market hypothesis
Semi-strong form efficient market hypothesis
Strong form efficient market hypothesis
Academicians can better understand the concept of the efficient market hypothesis.

12. Key Elements of Thesis in Introduction
(Expected) Contribution
Do your thesis add some new results or new arguments to academic or practical world?
New data?
New evidence supporting the specific hypothesis?
If there is nothing new, then your thesis is worthless.
Why do we (readers for your thesis) have to read your thesis instead of others?
We do appreciate a little tiny contribution of your thesis.
Survey paper (If your motivation is strong and your analysis is objective and comprehensive, then it will be O.K.)
You should have your own perspectives to analyze existing literature.
Suggestions for the economic policy for your country.
Implications for new regulations of your country.

13. Contribution (Case 1): Fourth Paragraph
What is uniqueness for this academic paper?
There are many academic papers dealing with agency problems even in Korea. What are differences between this paper and earlier papers?
Literature Review in Introduction
Mitton (2002) shows that companies with higher outside ownership concentration had significantly better stock performance during the Asian financial crisis including Korea data.
Difference:
1. Use more comprehensive data set. (590 vs 144) and various agency cost proxy variables.
Examine also agency problems between shareholders and bondholders.
Examine whether different corporate governance structures (chaebol vs. non-chaebol corporate governance) have different implications about agency problems.

14. Structure of Paper (Case 1)
What does a paper contain?
Last Paragraph: The paper proceeds as follows. Section 2 reviews related studies and develops hypotheses to be tested, and Section 3 described the data, provides some summary statistics, and defines variables used in the analysis. Section 4 presents the empirical results. Section 5 discusses the results and its implications, and conclusion.
Literature Review
To identify your contributions and show differences between and others’.
To support your motivation (why your research topics are important.)
Others in Introduction (Not necessary. Depends on each paper’s characteristics )
Brief Results of Your Paper
To show your contributions based on results.
For ex., you may have results that are different from others’.

15. Key Elements of Thesis Reliability Your thesis should be reliable.
Are your arguments or new results reliable?
Logical explanation, source of data, and relation with other empirical results
Your thesis should be reliable.
If your argument is based on newspaper, can we believe it?
You can raise issues based on newspaper to analyze these issues.
Your argument should be based on academic papers or (and) reliable data in an objective way.
If your arguments are not reliable, then your thesis can not be accepted.
Citation of other papers is very important to support your arguments.
If there are some papers against your arguments, you should address their papers and show empirical results or logical reasoning about why your arguments are more reliable or different.

16. How to find your thesis topic and write the thesis?
Find a few of benchmark papers.
Review academic papers.
Identify the methodology of benchmark papers.
You may need to tailor the methodology for your research purpose.
Identify what are your research purposes (questions).
Identify what is your motivation.
Don’t rely on only your imagination.
Think about what are your expected contribution.
If your paper is related to empirical tests, you should identify the source of data.
Are data available? Is the source of data reliable?
If these steps are full-filled, you are ready to make a thesis proposal.

17. Source of finding related papers
1. Library of Kyung Hee University (Periodical Journal) 2. Source: -> NDSL (Registration is required.) 3. Science Direct: 4. SSRN: for working papers 5. Previous MKE Thesis’s references

18. Typical Structure of Thesis: Data Analysis
1. Introduction (Later writing is desirable. )
2. Literature Review (Comprehensive Review)
Your thesis usually needs it.
This introduces through review for either readers who are not familiar with this issues or for the references of researchers.
3. Your Theory or Hypothesis (Only it is applicable.)
4. Data and Methodology (Only if you use data for your own empirical results.)
Source of your data
Methodology of your empirical tests
5. Empirical Results (About hypotheses)
Data Description
Data Analysis
Interpretation of Results
6. Conclusions (Later writing is desirable)

19. Homework # 1 40% Grade is based on your homework report.
Power point will be preferred.
Find a benchmark paper of your thesis or any empirical paper. (the title, author names, journal, published year should )
Try to identify motivation, purpose, and contribution.
To find out the source of data.
I will ask all of students to present their homework.

20. Presenter & Discussants
Submission Date
Presenting Date
Presenter
Discussant 1
Discussant 2
2 Days before Presenting Date
1/19 Group A
(5)
Gloria
Akbarshoi
Iuliia
Sein
Nimalan
Erika
Onon
Naana
Tran
Berhanu
Sattobek
Saikal
Lamia
Samson
Shazad
1/21 Group B
Nader
Victor
Donald
Georges
Antonio
2 days before Presenting Date
1/22 Group C
1/25 Group D

21. Agency Problems and Performance of Korean Companies during the Asian Financial Crisis
Introduction
Related Studies and testable hypotheses: Literature Review
Data and summary statistics: Descriptive Statistics
Empirical Results: Interpret the results
Summary and conclusion

22. 2. Literature Review
Agency costs of equity: Conflicts of interest between shareholders and managers (Jensen (1986) and Jensen and Meckling (1976))
Conflicts of interests between controlling shareholders and outside minority shareholders (La Porta et al. (2000))
Agency costs of debt: Conflicts of interest between shareholders and bondholders (Jensen and Meckling (1976))
Underinvestment Problem
Overinvestment Problem

23. Testable Hypotheses
Expect the positive relation between management or the largest shareholder ownership and performance at a lower level
Expect the negative relation between management or the largest shareholder ownership and performance at a higher level
Jensen and Meckling (1976) and Morck et al. (1988) and Ang et al. (2000)
Expect no significant relation between free cash flows and performance during a financial crisis.
Jensen (1998)’s free cash flow hypothesis
In an economy wide financial distress, free cash flow problems would become less important.
3. Expect negative relation between performance and the degree of corporate diversification
Denis et al. (1997a), Rajan et al. (2000), and Lins and Servaes (2002)
Corporate diversification reduces firm’s value and agency problems between shareholders and managers are the cause of value-reducing diversification. (Yun and Kim (2002)

24. Testable Hypotheses
4. Expect the negative relation between short-term leverage and performance during a crisis.
During a economy wide crisis, liquidity is more important and short-term leverage (debt) put more pressures to the financially distressed companies.
5. Expect that various agency problem proxy variables would have more significant explanatory powers for chaebol companies.
Chaebol has more strong controlling power over all member firms through pyramid structures and cross holdings even when they have claims on small portion of the firm’s cash flows. (Claessens et al. (2000)).
Chaebol has more weak corporate governance.

25. 3. Data and Summary Statistics
Sample Description and Source of Data
All the firms on the Korean Stock Exchange as of May 1, 1997.
Exclude firms without stock price data on the 2000 Korea Stock Research Institute (KSRI)’s Stock Data Base
Exclude firms without the financial statement data on the Korea Listed Companies Association (KLCA)’s Listed Companies Data Base
Exclude firms in the financial industry based on KSRI industry code.
The final sample include 590 companies.
Out of these, 135 firms belong to the top 30 chaebols as of April 1997.
Korea Fair Trade Commission (KFTC) ranks Korean conglomerates (chaebols) based on their total assets, and identifies the 30 largest chaebols.

26. Description and Interpretation of Table
Why do you need to put the table here?
Sample description
Academic paper generally requires sample description.
From sample, you may get some important information related to your thesis purposes.
How to describe and interpret Table?
Table does not talk by itself. You should draw some meaningful information from table.
No idea: Table 1 shows characteristics and performance of chaebols and non-chaebols from 1996 to 1998.
From Table 1, we can conjecture that they want to talk about the differences between chaebol and non-chaebol firms.
This is one of the paper’s purposes: chaebols may have more serious agency problems during a financial crisis.

27. Table 1

28. Format of Table Does Table 1 has a title?
Summary Statistics
Characteristics and performance of chaebols and non-chaebols from 1996 to 1998
Does Table 1 have comprehensive explanations to understand its contents?
Unit? Definition of ROA, ROA97, ROA98, B/M, Prior 1-year return?
Source of Data? Year?
In case of short paper (less than 30 pages), you don’t need Table 3-1, Table  Table 1, Table 2,

29. Description and Interpretation of Table
Chaebol firms are typically much larger than non-chaebol firms.
Average market capitalization
Average total assets
Chaebol firms’ performance was much worse than that of non-chaebol firm right before and after the financial crisis.
average ROA (1996), ROA(1997 and 1998)
Prior 1-year
This fact is important since it may indicate that chaebol may have more serious agency problems.
After the financial crisis, both firms’ performance was poor.
B/M : Chaebol’s B/M (1.3) is higher than non-chaebol’s (0.87).
Sales?

30. Proxy variables for potential agency problems
Largest shareholder ownership vs. agency problem: Initially positive and thereafter negative.
the ownership of those who have special relationship (family members) with the largest shareholder
Manager ownership vs. agency problem: Initially positive and thereafter negative.
Manager ownership is the total percentage ownership held by the managers of each company.
Free cash flow (defined by this paper)
Blockownership vs. agency problem: Negative relation
the total percentage ownership held by individual and institution that have more than 5% of ownership and have not any relation with largest ownership.

31. Proxy variables for potential agency problems
Leverage variables vs. agency problems: positive relation
Short-term leverage: short-term debt/total assets
Long-term leverage: long-term debt/total assets
Degree of diversification vs. agency problems: positive relation
the number of business segments that are responsible for 10% of total sales

33. Information of Table 2.
All proxy variables for chaebol firms, except for free cash flows over total assets, are significantly different from those of non-chaebol firms.
Chaebols have smaller largest shareholder ownership and managerial ownership.
Chaebols have larger blockownership.
Cross holdings among companies that belong to the same chaebol.
If then, can blockownership represent outside shareholders that can monitor or prevent agency problems?
Blockownership proxy may not be a good proxy.
Cash flows are negative in most cases, which may indicate that cash flows are not significant factor causing agency problems.
Chaebol firms typically have higher leverage.
Short-term leverage of chaebols was extremely high. (40%)

34. 4.1. Univariate comparison of performance
Table 3 divides firms into High and Low groups based based on agency problem proxy variables.
High group includes firms with proxy variables in the top 30th percentile (high), while Low group includes firms with proxy variables in the bottom 30th percentile.
top 30th percentile of proxy variable actually means 70th or higher percentile proxy variables.
The bottom 30th percentile of proxy variable means 30th or lower percentile proxy variables.
Performance of High and low groups
The average holding period returns during the crisis from May 1997 to August 1998.
The mean of average ROAs during 1997 and 1998 fiscal year ends.

37. Statistical Issues What do *, **, *** indicate?
*** represents the case where the differences are significant at the 1% significance level.
** represents the case where the differences are significant at the 5% significance level.
* represents the case where the differences are significant at the 5% significance level.

38. Description of Table 3(page 339)
General description
For chaebol firms, significant (at least at the 10% significance level) differences in holding period returns during the crisis period between the high and the low groups appear for largest shareholder ownership, free cash flow and short-term leverage.
For non-chaebol firms, we observe significant differences in returns for all agency problem proxy variables except for the diversification variable.
In contrast to the chaebol firms’ case, there are significant differences in returns among different manager ownership and blockholder ownership groups.
Specific description
Chaebol firms in the high largest shareholder ownership earned on average 15% significantly higher returns than chaebol firms in the low largest shareholder ownership group.

39. Implication or interpretation of Table 3
The univariate comparison of performance between different agency proxy variables suggests that agency problems seem to explain the performance of non-chaebol firms better than the performance of chaebol firms.
Agency problems are closed related to stock returns while they are less closely related to operation performance (ROA).
There are almost similar significant differences but for blockholder ownership and free cash flows, the results are the opposite of the expected results.
The role of agency problems seems to be different for chaebol firms compared to its role for non-chaebol firms, especially for stock return performance.
Based on the results of chaebo-non-chaebol firms.

40. Multivariate regression analysis
R represents the holding period return from May 1997 through August 1998 and ROA represents the average ROAs during 1997 and 1998 fiscal year ends.
Expectation
β (5) < 0
β (6) >0, β (7)< 0 , β (8) >0
β (9) > 0 , β (10) > 0
β (11) > 0 or insignificant during a financial crisis
β (12) < 0 , β (13) < 0

42. Main Results Blockholder ownership
Among agency problem proxy variables, the coefficient of the largest shareholder (LAR1), blockholder ownership and leverages are significant for total sample.
Largest stockholder ownership
β (6) is the coefficient of LAR1
β (6) >0 indicates the high ownership of largest shareholders (at least up to the 30% level) positively affect stock returns during the crisis.
β (7)< 0 indicates the existence of nonlinearity in relation between the largest shareholder ownership and performance (stock returns), although it is not significant.
Blockholder ownership
β (10) > 0 indicates that blockholders play positive roles in reducing agency problems.
Cross holdings? Can affiliated companies monitor agency problems well?

43. Summary and conclusion
Readdress the purpose of the paper
This paper examines whether agency problems explain the performance of Korean companies during the Asian financial crisis.
Readdress the empirical method and data
The main results
seem to suggest that corporate governance structure matters in determining the role of agency problems during the crisis.
Agency problems play different roles in the stock market compared to its roles in explaining the differences in operating performance.
This result is somewhat consistent with Rajan and Zingales (1998) in that if investors pay more attention to corporate governance under a crisis, there will be probably different impacts of agency problems on stock returns compared to their impact on operating performance.

44. Summary and conclusion
Focused on specific results that the authors shed light on.
Find some evidence that the explanatory power of agency problems is different for chaebol firms, comapred to non-chaebol firms.
Blockholder ownership is significant when only chaebol firms are separately analyzed.
It is not significant when non-chaebol firms are separately analyzed.
Weakness of the paper’s conclusion
Since they initially focus on three purpose, they should provide implications about three purposes.
They do not mention about effect of agency conflicts between bondholders and shoareholders on the firm’s performance.

45. Main Weakness of the paper
Implications of blockholders ownership’s effect are doubtful.
Cross holdings worsen agency problem between the largest shareholder and minority shareholders.
They include crossholdings in blockholder ownership.
Positive effect of blockholder ownership on chaebols’ performance is not compelling to the readers.
Multivariate results do not seem to support that chaebol firms face more serious agency problems.
Ex. Chaebol dummy does not have negative effect on the firms’ performance.
Agency problems related to leverage seems to be less serious in chaebol firms, although chaebol firms have higher leverage.
Do their paper really support the argument that chaebol has more serious agency problems?