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Distress of small and medium-sized enterprises and role of credit guarantee scheme in restructuring : The case of Korea

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Frame of Image umption since early 2003, on top of recent price hikes in raw materials like oil and steel have placed many SMEs in a “nowhere-to-go” situation in terms of both revenue and cost. More seriously, this sector faces structural challenges: first, a relative underperformance of SMEs in productivity and profitability to large corporations attributable to a lack of innovation capacities, second, restructuring following the 1997-98 financial crisis has resulted in inefficient factor utilization, and third, emergence of fiercely growing competitors like Chinese counterparts. In addition, benign financial assistance offered by the government to SMEs such as public credit guarantee program has only provided a temporary relief. In the long run, it has been more detrimental, for it has gradually eroded the competitiveness, self-independence, and viability of those firms receiving assistance. Despite structural problems deeply rooted in Korean SMEs, the sector has been less restructured even amid the wave of massive corporate restructuring efforts undertaken after the crisis. To prevent contagion of defaults among the SMEs, the government has offered various bailout programs such as additional credit guarantees, structured financing instruments, etc. Debt restructuring of large corporations has also created a favorable financial environment for SMEs: financial institutions have tried to provide more funding than before. This paper will examine where the current distress among Korean SMEs s


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Title Distress of small and medium-sized enterprises and role of credit guarantee scheme in restructuring
Similar Titles
Sub Title

The case of Korea

Material Type Reports
Author(English)

Kang, Dongsoo

Publisher

Korea Development Institute

Date 2005-07
Pages 48
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Financial Policy
Holding Korea Development Institute