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How do capital structure policies of emerging markets differ from those of developed economies? : Survey evidence from Korea

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  • How do capital structure policies of emerging markets differ from those of developed economies?
  • Lee, Hongbok; Oh, Sekyung; Park, Kwangwoo
  • KAIST


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Title How do capital structure policies of emerging markets differ from those of developed economies?
Similar Titles
Sub Title

Survey evidence from Korea

Material Type Reports
Author(English)

Lee, Hongbok; Oh, Sekyung; Park, Kwangwoo

Publisher

[Daejeon, South Korea]:KAIST

Date 2013-08
Series Title; No KAIST college of business working paper series / 2013-010
Pages 39
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Trade
Economy < Economic System
Holding SSRN

Abstract

We examine the capital structure policies of Korean firms using survey data for business group (chaebol) firms and independent firms. Our results are compared with the findings in the earlier studies for developed economies: Graham and Harvey (2001) for the U.S. and Brounen, De Jong, and Koedijk (2006) for Europe. Korean CFOs are concerned about financial flexibility and volatility of earnings when issuing debt, and they are concerned about target debt ratio maintenance and recent stock price increase when issuing equity. In contrast with independent firms, chaebol firms are more concerned about differences in corporate tax rates between foreign and domestic markets, and the risk of refinancing in bad times. Chaebol firms are less likely to issue debt when faced with insufficient internal funds, which indicates that active internal capital markets are at work among the firms in a business group. (The rest omitted)