재무연구 제 권 호 (2007년 4월)
Asian Review of Financial Research, Vol., No..
pp.1544~1582
pp.1544~1582
Do Soft Budget Constraints Cause Borrowers’ Default ?
Sunghwan Kim Marketing Business Group, KT Corporation, Sungnam City, Korea.
Kwangwoo Park KAIST Graduate School of Finance, Seoul, Korea.
Byungmoon Seol School of Business Administration, Kyungpook National University, Daegu City, Korea
In this paper, we examine the existence and the role of the soft budget constraints (SBC) in the Korean economy. Particular attention is given to the pre-financial crisis period of 1997 on firm level data when the Korean banking sector generated inefficient credit allocation. We report that Korean business group (chaebol) firms have more severe SBC problems, especially in long-term loans, and that there exist severe adverse effects on the profitability of loans to SBC firms compared to nonchaebol firms. It appears that the significant negative effects of loans to SBC firms on profitability before and during the crisis are mainly driven by the inefficient use of funds by chaebol firms.
Sunghwan Kim
Kwangwoo Park
Byungmoon Seol
In this paper, we examine the existence and the role of the soft budget constraints (SBC) in the Korean economy. Particular attention is given to the pre-financial crisis period of 1997 on firm level data when the Korean banking sector generated inefficient credit allocation. We report that Korean business group (chaebol) firms have more severe SBC problems, especially in long-term loans, and that there exist severe adverse effects on the profitability of loans to SBC firms compared to nonchaebol firms. It appears that the significant negative effects of loans to SBC firms on profitability before and during the crisis are mainly driven by the inefficient use of funds by chaebol firms.
