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Assessment of progress in corporate restructuring in Korea since the 1997-98 crisis

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Frame of Image es of the chaebol
affiliates in early 1997, starting from Hanbo Steel Co., was the prelude of Korea’s financial crisis. Also, the highly leveraged expansion of the chaebols and their
reckless investment have been at the core of intrinsic vulnerability of the Korean economy, both financially and macroeconomically. By the same token, a genuine economic recovery cannot be achieved unless the corporate sector, particularly, the chaebols, is fully equipped with sound capital and governance structure. During the past five years or so, Korea’s corporate sector has made significant progress in terms of soundness and efficiency, in fact, unprecedented by Korea’s own historical standards. After showing extremely high debt-equity ratios of over 500
percent in the years preceding the crisis, the largest chaebols reduced their debts to achieve the target goal of 200 percent debt-equity ratio by the end of 1999. Intra-
chaebol debt guarantees of the thirty largest chaebols have decreased significantly. More importantly, many large-scale spin-offs have resulted in streamlining business activities among the financially vulnerable chaebols with a significant reduction in the number of poorly performing affiliates. Even though this led to the reduction of the
top 30 largest chaebols in 1997 by nearly half by 2002, the restructuring of these poorly performing businesses enabled the reallocation of resources such as labor and capital from troubled firms to growing firms. At the same time, corpor


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Title Assessment of progress in corporate restructuring in Korea since the 1997-98 crisis
Similar Titles
Material Type Reports
Author(English)

Kim, Joon-Kyung

Publisher

Seoul:Korea Development Institute

Date 2003-11
Pages 58
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Financial Policy
Holding KDI; KDI School

User Note

This paper is prepared to presents at the KDI conference on "Emprical Evaluation of Corporate Restructuring in North East Asia," Seoul, Korea, 12 November 2003.