A Microdata Analysis of Recent Corporate Investment in Korea (in Korean)

Kiseok Hong ()
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Kiseok Hong: Department of Economics, Ewha Womans University

Economic Analysis (Quarterly), 2006, vol. 12, issue 1, 1-52

Abstract: This paper examines empirically why corporate investment in Korea has been so sluggish since the 1997 currency crisis. In particular, it estimates an investment equation using firm-level data, with particular emphasis on the debt burden of the corporate sector. Estimation results show, first, that the effects of the debt/asset ratio on investment are larger and more significant in the post-crisis period than in the pre-crisis period. Second, the effects of overall uncertainty (as measured by standard deviations of stock returns or operating profit) are not notably stronger in the post-crisis period. Third, institutional changes such as increased foreign ownership and increased dividend payouts do not appear to be critical, either. These results support the view that the recent investment slowdown is mainly related with downside risk concerning the debt/asset ratio.

Keywords: corporate investment; investment slowdown; debt/asset ratio; currency crisis (search for similar items in EconPapers)
JEL-codes: E22 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (2)

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