Victory of financial terrorists

22 February 2016

The Korea Times

In an article contribution by Associate Professor Shin Jang-Sup, Department of Economics, and former adviser to South Korea’s finance minister, he discussed the business phenomenon of dividing a merged company into three almost immediately. This, he noted, is what is actually happening in U.S. Dow Chemical and DuPoint, the leading and second largest chemical firms, which decided to merge last December and, within two years, to break this merged company into three separate ones. He highlighted that both companies received attacks from activist hedge funds and the decision can be better understood as “financial engineering” by those activist funds. He opined that one way to tackle this is to rebalance regulations over corporations and those over institutional investors. By reflecting the new reality, regulations on institutional investors should be strengthened while those on corporations should be relaxed. He added that, most importantly, regulators should remain vigilant and devise measures to keep the behaviour of institutional investors in line with the interest and intention of the true owners of the money entrusted to them.

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