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Has financial liberalization improved economic efficiency in the Republic of Korea? : Evidence from firm-level and industry-level data

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  • Has financial liberalization improved economic efficiency in the Republic of Korea?
  • Park, Jungsoo; Park, Yung Chul
  • Asian Development Bank Institute


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Title Has financial liberalization improved economic efficiency in the Republic of Korea?
Similar Titles
Sub Title

Evidence from firm-level and industry-level data

Material Type Reports
Author(English)

Park, Jungsoo; Park, Yung Chul

Publisher

[Tokyo]:Asian Development Bank Institute

Date 2014-05
Series Title; No ADBI Working Paper / 480
Pages 30
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Original Format pdf
Subject Economy < Financial Policy
Industry and Technology < Entrepreneurship
Holding ADBI

Abstract

This study analyzes the effects of financial liberalization on the lending behavior of banks and non-bank financial institutions (NBFIs) before and after the 1997 Asian financial crisis, using panel regressions on Republic of Korea firm-level and industry-level data of the period 1991–2007. It also develops a financial liberalization index to incorporate the multifaceted nature of financial reform. Findings show that financial liberalization has led banks and NBFIs to allocate more of their loans to small and medium-sized firms with good performance histories, thereby helping these entities to improve their total factor productivity growth. This paper does not find similar effects of financial liberalization on efficiency at large firms or at the industry level. Heavier reliance on direct financing after the crisis has not improved the productivity of large firms.