Abstract
Circular shareholding is established when at least three member firms in a business group hold stock in other member firms and form a series of ownership in a circular way. Although there have been many studies which inves-tigated a negative effect of circular shareholding on firm‘s va lue, few studies have discussed how to resolve the problem given complicated ownership structures of large business groups .This paper is based on a mixed integer programming model, which was proposed in the author’s previous research and can identify the ownership share divested in order to resol ve circular shareholding. Since the optimization model becomes too complicated for large business groups and requires a sophisticated software to solve it, we propose a simple heuristic method that can find a good approximate soluti on to the model. Its applications to twelve Korean large business groups show that the heuristic method is not jus t computationally attractive but also provides near-opti-mal solutions in most cases.
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