April 20, 2024

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[THE INVESTOR] Six of the 10 top South Korean conglomerates spent more on entertaining buyers or others with business connections over the past four years, but the increases did not appear to have helped with corporate growth.

The six include Samsung, Hyundai Motor Group, Hanwha and GS.

According to research by The Investor and the Herald Business, ten South Korean firms run by owner families increased their entertainment expenses by double-digit percentages between 2012 and 2015. 

Hyundai Motor Group headquarters in Seoul

Those that reported zero entertainment expenses showed an increase in miscellaneous account spending -- found to be earmarked for entertainment expenditure at many large Korean firms.

But more expenses in such areas did not seem to lead to larger sales or more added value, the study showed.

Samsung showed the biggest increase in entertainment or miscellaneous spending, with 48 of its affiliates reporting they spent 689.2 billion won (US$622.5 million) in 2015. That reflected 38 percent growth over 2012.

Sales at these affiliates, however, rose just 4 percent in those four years.

While entertainment expenses rose an annual average of 13.1 percent, sales rose 0.4 percent a year.

The situation was similar at other conglomerates.

SK, for instance, showed a 39.2 percent increase, spending 476 billion won. However, sales fell 11 percent in 2015, compared to 2012.

GS, led by chairman Huh Chang-soo, showed a 16.3 percent increase, but sales fell 26.9 percent.

In terms of added value, SK was the only firm of the six conglomerates whose added value rose by a higher clip than entertainment expenses.

By Yoon Hyon-jong (factism@heraldcorp.com)/Kim Ji-hyun (jemmie@heraldcorp.com)