The Impact of Foreign Liabilities on Small Firms: Firm-Level Evidence from the Korean Crisis

47 Pages Posted: 26 Jan 2012

See all articles by Yun Jung Kim

Yun Jung Kim

University of Michigan at Ann Arbor - Department of Economics

Linda L. Tesar

University of Michigan at Ann Arbor - Department of Economics; National Bureau of Economic Research (NBER)

Jing Zhang

University of Michigan at Ann Arbor

Date Written: January 2012

Abstract

Using Korean firm-level data on publicly-listed and privately-held firms together with firm exit data, we find strong evidence of the balance-sheet effect for small firms at both the intensive and extensive margins. During the crisis, small firms with more short-term foreign debt are more likely to go bankrupt, and experience larger sales declines conditional on survival. The extensive margin accounts for a large fraction of small firms' adjustment during the crisis. Consistent with many studies in the literature, large firms with larger exposure to foreign debt paradoxically have better performance during the crisis at both the intensive and extensive margin.

Suggested Citation

Kim, Yun Jung and Tesar, Linda L. and Zhang, Jing, The Impact of Foreign Liabilities on Small Firms: Firm-Level Evidence from the Korean Crisis (January 2012). NBER Working Paper No. w17756. Available at SSRN: https://ssrn.com/abstract=1992270

Yun Jung Kim (Contact Author)

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

Linda L. Tesar

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States
734-763-2254 (Phone)
734-764-2769 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Jing Zhang

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

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