Do Foreign Bank Operations Provide a Stabilizing Influence in Korea?

Yongil Jeon, Stephen Miller and Paul A. Natke
Additional contact information
Yongil Jeon: Central Michigan University
Paul A. Natke: Central Michigan University

No 2004-21, Working papers from University of Connecticut, Department of Economics

Abstract: This paper examines Korean data (1994-2001) to determine if foreign banks behave differently than domestic banks and if that behavior provides a stabilizing influence on the Korean banking system and economy. Moreover, this paper also considers the effect, if any, of the Asian financial crisis on foreign and domestic bank behavior. Foreign banks. financial ratios differ from Korean banks with two notable exceptions: provisions for loan losses and loan growth. Before the Asian financial crisis, all banks. loans generally were unresponsive to Korean market conditions. Once the crisis began, foreign banks reduce total lending. Foreign banks increase and Korean banks decrease won-denominated loans when Korean GDP growth increases and when Korean interest rates increase. Finally, foreign banks. lending is sensitive to changes in home-country conditions.

Keywords: Asian financial crisis; Korean commercial banks; stabilization; foreign bank operations (search for similar items in EconPapers)
JEL-codes: E44 G21 O16 O53 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2003-08
New Economics Papers: this item is included in nep-ifn, nep-mfd and nep-sea
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Published in the Quarterly Review of Economics and Finance, February 2006, 82-109.

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Journal Article: Do foreign bank operations provide a stabilizing influence in Korea? (2006)
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