When Big Is Slow: Tax-Motivated Income Shifting and Dividend Payouts of Korean Chaebols After the Transition to a Territorial Tax System

This study examines the influence of organizational characteristics on the agility of tax-planning decision-making by the Korean business groups known as chaebols. Using South Korea’s transition from a worldwide to territorial tax system in 2023 as a quasi-exogenous shock, a triple-differences analysis shows that Korean multinational corporations (MNCs) engaged in tax-arbitrage transactions by significantly increasing tax-motivated income shifting and dividend payouts following the reform. In addition, chaebol MNCs were less responsive than non-chaebol MNCs. The results suggest that the complex and hierarchical organizational structures of chaebols hinder swift strategic adjustments in response to tax-policy changes, consistent with strategic agility theory. This study is the first to empirically examine the impact of South Korea’s transition from a worldwide to territorial tax system. In addition, it provides an interdisciplinary contribution to relevant literature by integrating the management theory of strategic agility and international taxation.