Do Main Banks Extract Rents from their Client Firms? Evidence from Korean Chaebol

Yitae Kim, Kwangwoo Park, Ronald Ratti and Hyun-Han Shin

No 2002-9, CEI Working Paper Series from Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University

Abstract: Using a unique data set on all industrial firms listed on Korea Stock Exchange and KOSDAQ stock market from 1991 to 2000, we find that cash ratios for chaebol firms are lower than for non-chaebol firms. Controlling for access to the bond market and financial services arms does not change this result. We do however find that there is a shift in the degree of bank power over the last decade. Consistent with the main bank monopoly hypothesis during the corporate restructuring process after the financial crisis in 1997, the interest differential charged to chaebol firms is significantly higher than the earlier period, suggesting extraction of rents against chaebol client firms by main banks.

Keywords: Cash holdings; bank power; rent extraction; Korean chaebol (search for similar items in EconPapers)
JEL-codes: G15 G18 G32 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2002-09
Note: This Version: June 2002; First Version: May 2001
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https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/13894/wp2002-9a.pdf

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Journal Article: Do Main Banks Extract Rents from Their Client Firms? Evidence from Korean Chaebol (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitcei:2002-9

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