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Since the currency crisis in 1997, there have been many efforts for corporate governance reform in Asia and Korea. In this article, we intend to analyze the effect of the reform process in Korean companies. We show that the decrease in controlling shareholder ownership, the increase in the ownership rates of institutional investors and foreign investors, and the increased ratio of outside directors are related to the increase in stock repurchase amount and dividend payout. The increase in stock repurchase and dividend payout represents the shareholder-friendly behaviors of Korean firms after the crisis. It is shown that governance reform efforts in Korea have at least increased the shareholder-friendly behaviors of the companies. However, after the crisis, Korean firms increased cash holdings by reducing research and development (R&D) investments and utilized increased cash holdings to pay stock repurchase and dividends. This raises the question of whether shareholder-friendly management resulting from governance reform was only an institutional isomorphism from responding passively to outside pressure
