This study analyzes the effect of intra-group transactions on firm performance and firm value. The sample consists of listed firms which have internal business transactions(sales and purchases) during the period 2005 to 2010. The main purpose of this paper is to compare differences in trading behavior, and efficiency of intra-group transactions between large business groups designated by the Fair Trade Commission and small business groups. Also, we examine the comparison analysis of firm performance between two groups before and after the change of regulations. The empirical findings are as follows. First, the intra-group transaction ratio of large business groups is significantly positively related to firm performance and firm value. This result supports the efficient transactions hypothesis. However, we find a significant negative correlation between the intra-group transaction ratio and firm performance in non-regulated small business groups. This evidence is consistent with the tunneling hypothesis that Korean large business groups have used transactions with affiliates to transfer owner's wealth and management right illegally. Interestingly, we can confirm that the inefficiency of unfair internal transactions is observed in small business groups rather than in large business groups. This is contrary to common belief and the findings of previous studies about Korean Chaebol. Second, the panel analysis on a change of regulation standard reports the following evidence. In the event of a regulatory change from large business group to small business group, intra-group transactions have a significant negative effect on firm performance. Consequently, there are distinct differences in the efficiency of intra-group transactions, depending on whether firms belong to large business groups or not. From above conclusions, we can obtain the following policy implications. It is necessary to adjust a range of regulated firms and to complement monitoring system for unfair trade practices, based on ex-post evaluation.