The number of holding companies in South Korea increased over the past year, keeping its upward trend since the government introduced the system in the late 1990s, the antitrust watchdog said Thursday.

As of end-September, the number of holding companies reached 140, up from the previous year's 132, according to a report by the Fair Trade Commission.

A holding company refers to a corporation that owns voting stock in another company or its affiliate and can influence management. Holding firms usually do not produce goods or services, and their purpose is to own shares of other enterprises.

The government has been encouraging local businesses to adopt a holding company structure, saying that it can help streamline corporate governance. It introduced the holding company system in the country in 1999.

The report showed that the average value of assets held by holding companies came to 1.59 trillion won ($1.38 billion), down from 1.88 trillion won in 2014. The reason for the drop was attributed to five financial holding companies, including Woori Financial, merging with related banks.

The average debt ratio of holding companies stood at 41.6 percent, which is far below the 200 percent ceiling imposed by law.

The debt ratio, however, rose from 35.4 percent tallied a year earlier, the report showed. This increase is due to heavily indebted affiliates coming under the control of the holding companies.

The report also said that a holding company had an average of 10.4 subsidiaries under its wing, slightly lower than the previous year's 10.9.

Citing the latest data, the FTC said that the holding company system seems to be taking root in South Korea's corporate culture in accordance with its objective of enhancing transparency in corporate governance and ownership.

It added that compared with the past, there has been more conglomerates switching to the holding company system as they move to get rid of their cross-shareholding arrangements.

Despite such developments, of South Korea's five largest conglomerates, only LG and SK have switched to a holding company structure, with the Samsung, Hyundai Motor and Lotte groups not making the transition. (Yonhap)