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Structural fundamentals of Korean corporations: This time was different

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Frame of Image he Won depreciated deeply reflecting pessimistic views on the Korean economy. In fact, some commentators such as popular media criticized that Korea have not learned lessons from the financial crisis in 1997. But the Korean economy has recovered relatively well. There were many factors which enabled this robust recovery. Government policies such as expansionary fiscal and monetary policy were promptly taken and turned out to be very effective. Early recovery of developing countries including China created ample external demand. Moreover, the fundamentals such as financial soundness of financial institutions and corporations notably improved after the financial crisis in 1997. Especially, chaebols that routinely pushed growth and market share at the expense of profitability and shareholder’s value1 have experienced a full scale restructuring (financial and non-financial) and improved their corporate governance. These fundamental changes were mainly due to the law and regulation reform driven by the outbreak of the crisis and the market monitoring mechanism outgrown by these policy reforms. The notorious high debt-equity ratio declined significantly and liquidity of the corporation (cash holding ratio) increased.
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Such kind of mismanagement was sustainable only because there was no checking mechanism
available to restrain reckless business diversification, excessive borrowing, and dogmatic decision making by the controlling shareholders.
EWC / KDI Conference, Honolulu, Hawaii,


Full Text
Title Structural fundamentals of Korean corporations: This time was different
Similar Titles
Material Type Proceedings
Author(English)

Lim, Kyung-Mook

Publisher

[Sejong, Korea]:Korea Development Institute

Date 2010-08
Event

EWC / KDI Conference

Pages 25
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Financial Policy
Government and Law < Laws and Legislation
Holding Korea Development Institute

User Note

EWC / KDI Conference, Honolulu, Hawaii, 19–20 August 2010