Reduced Cross-sharing is No Silver Bullet Solution to Lotte Ownership Dispute
Reduced Cross-sharing is No Silver Bullet Solution to Lotte Ownership Dispute
  • By Jung Yeon-jin (
  • 승인 2015.09.10 10:48
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Lotte Group’s cash dividend payout ratio (CDPR) turns out to be way below the average CDPR of all listed companies.

According to a report released by the Daishin Economic Research Institute, the average CDPR of Lotte Group’s listed affiliates was 6.2 percent over the past decade, much lower than the average CDPR (17.2 percent) of 1,264 listed companies (except loss-making firms).

Some of the investment resources needed for large-scale investment, such as M&As, was channeled into inter-affiliate cross-sharing, consequently lowering the average CDPR of Lotte Group’s listed affiliates, according to the report.

Its TSR (Total Shareholder Return) was also disappointing. The 2014 market cap-weighted average TSR of eight Lotte affiliates was -24.6 percent, roughly 20 percentage points lower than KOSPI’s TSR of -4.7 percent during the same period.

The report said, “Even if Lotte Group pares down cross-sharing arrangements and opts for IPOs, lurking managerial risks, i.e. ownership dispute, would inevitably detract from its shareholder value. The potential for ownership disputes at Lotte should be eliminated.”

“Dominant stockholders, including Lotte Group Chairman Shin Dong-bin, Shin Dong-ju (former vice chairman of Lotte Holdings in Japan) and Chair of the Lotte Foundation Shin Young-ja, own a significant stake in key Lotte affiliates. Carrying out disaffiliation in consideration of each controlling stockholder’s equity ownership is the key to reforming Lotte’s corporate governance,” the reported added.

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