This study aims to suggest the means to encourage initial public offerings and paid-in capital increases through empirical analysis. Many economic factors have contributed to the recent rise of stock prices, and the most significant one of them is that, over the past couple of years, Korea’s real economy has greatly frowned in its relative value compared to a number of foreign countries. Furthermore, the high debt ratio of Korean businesses has been disproportionately reflected in the rise of stock prices, far beyond the real economy’s relative value growth. The leverage effect that results from the high debt ratio can also be a big risk factor that can lead to a stock market crash if the outlook of the real economy becomes less than optimistic.
The high debt ratio found in many Korean businesses can be attributed to growth-driven industry development policies and a high dependence on foreign debt. The government has offered countless “financial rescues” to large conglomerates without holding them accountable for their errors; the lack of accountability has fostered reckless corporate investment and it has further increased debt dependence. Low-interest loans that act as a subsidy for the growth of specialized industries, conservation commission ceiling for corporate bond issuance, expense processing of interest cost, an unbalanced tax system in favor of the financial income, inconsistency in the corporate overseas office system, risk of management right loss associated with paid-in capital increase… and the list goes on. They can be put together and summarized as follows: Korean businesses, especially large conglomerates, can achieve the optimal financial structure through maximum debt dependence.
Even if a capital inflow into the stock market temporarily activates the system, if it’s not substantiated through initial public offerings and paid-in capital increases the market will not expand and stock exchange will not grow. Hence, the policy needs to encourage businesses to voluntarily push forth with initial public offerings and paid-in capital increases. The challenge lies in the fact that most of the private companies evade and delay going public even if they need more capital, and the public companies are not fond of paid-in capital increases. The issue can be addressed by applying the market mechanism to corporate bond issuance system.
기업금융정책과 주식시장육성(Corporate financial policy & promoting stock market)
[서울] : 한국개발연구원
|Series Title; No||정책연구시리즈 / 87-10|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||KDI; KDI School|