Corporate Restructuring and Governance Implications: A Case Study of the Guoco Group

• Main Author: KUSNADI, Yuanto
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2009
• Subjects: Corporate governance; Corporate restructuring; Accounting; Asian Studies; Business Law, Public Responsibility, and Ethics; Corporate Finance
• Online Access: https://ink.library.smu.edu.sg/soa_research/1147
• Institution: Singapore Management University

I study a series of restructuring activities undertaken by Guoco Group Limited in recent years and the implications on minority shareholders. The divestment of Dao Heng Bank Group to DBS Group reaped substantial benefits for Guoco, including an enormous cash reserves to fund future investments. However, the cash hoard was not implemented to the best use by Guoco’s managers. Subsequently, Guoco was involved in a number of share buybacks schemes. The share-buybacks met strong resistance from the minority shareholders and eventually forced out the second largest shareholders. Guoco was also engaged in related party transaction involving its subsidiaries in the property development business. Overall, I find evidences suggesting that corporate restructuring activities enhance the controlling owner’s grip on the group at the expense of the minority shareholders.