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Financial restructuring in Korea

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Frame of Image terms of trade shock put extremely heavy pressure on the thin profit margins of firms. Another big shock to the Korean economy occurred with the bankruptcy of Hanbo Group in January 1997. Four others of the thirty largest chaebols also went bankrupt in 1997: Sammi, Jinro, Haitai and New-Core Groups. The failure of these chaebols revealed problems with low profitability and excessive leverage ratios in the corporate sector and faulty corporate governance in Korea. Foreign investors had already become increasingly skeptical of the government’s willingness and ability to implement economic reforms and serious structural adjustment. In addition, the unanticipated intensity and power of contagion, first from Thailand and then Indonesia, came to bear its effects on Korea. This contagion
coincided with a period of structural adjustments as well as a cyclical downturn in the Korean economy. In November 1997, less than a year after its accession to the OECD, Korea experienced a severe financial crisis. With its useable foreign exchange reserves nearly exhausted, the Korean government formally requested assistance from the International Monetary Fund to mitigate the external liquidity shortage and regain the confidence of
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international investors. A complicated and often opaque combination of macroeconomic distortions and financial fragility were at the core of the economic crisis in Korea. These include an inefficient and distorted financial sector, weak supervision and prudential re


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Title Financial restructuring in Korea
Similar Titles
Material Type Reports
Author(English)

Kang, Moon-Soo

Author(Korean)

강문수

Date 2001
Pages 30
Language English
File Type Documents
Original Format pdf
Subject Economy < Financial Policy
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