Soft Related Lending: A Tale of Two Korean Banks

John Bonin () and Masami Imai
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John Bonin: Economics Deapartment, Wesleyan University

No 2005-011, Wesleyan Economics Working Papers from Wesleyan University, Department of Economics

Abstract: In this paper, we present indirect evidence that the IMF’s insistence on foreign control of two large nationwide Korean banks in exchange for short-term support during the 1997 financial crisis helped restrain soft related lending practices. News signaling the likely sale of a bank to a foreign financial institution yields an average daily decrease of about 2% in the stock price of related borrowers. News indicating difficulty in finding an interested foreign investor generates an increase in the stock price of related borrowers of about the same magnitude. These signals have larger impacts on less-profitable, less-liquid, and more bank-dependent firms.

Keywords: Related Lending; Korean Banks; Privatization; Globalization (search for similar items in EconPapers)
JEL-codes: G21 O53 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2005-12
New Economics Papers: this item is included in nep-ban and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Forthcoming in the Journal of Banking and Finance

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Related works:
Journal Article: Soft related lending: A tale of two Korean banks (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:wes:weswpa:2005-011

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