In Korea, the Thirst for Funds Drives Change

Hilton Root, Mark Andrew Abdollahian and Jacek Kugler
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Mark Andrew Abdollahian: Decision Insights, Inc., USA
Jacek Kugler: Claremont Graduate School, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2002, vol. 05, issue 01, 1-30

Abstract: It is widely acknowledged that Korea will not be secure against future economic crisis without structural reform of finance, enterprise and labor markets. Real reform requires a transfer of authority from the government to market-based institutions, forcing banks to take full responsibility for the loans they authorize. Before the crisis, the government implicitly insured depositors' bank loans made to the large conglomerates, leaving banks little incentive to develop the necessary skills in credit analysis and loan monitoring. The insured agents did not take proper care to manage their risks. Moral hazard or will increased government control over the financial sector weaken market discipline?

Keywords: Economic crisis; Chaebol; Korea economy; Corporate governance; President Kim Dae Jung; Corporate restructuring; IMF (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2002
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DOI: 10.1142/S0219091502000717

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