Corporate Bankruptcy in Korea: Only the Strong Survive?

Posted: 14 Mar 2001

See all articles by Giovanni Ferri

Giovanni Ferri

LUMSA University

Paola Bongini

Università degli Studi di Milano-Bicocca

Hongjoo Hahm

World Bank

Abstract

We analyze whether the build-up of financial vulnerabilities led listed Korean companies to bankruptcy. We find that pre-crisis leverage is systematically high for both poor performing/slow growing firms and for profitable/fast-growing firms. Pre-crisis leverage raises the probability of bankruptcy, which is lower for firms: (1) relying more on (renegotiable) bank credit; (2) with less inter-firm debt; and (3) having higher interest coverage ratios. Finally, none of these liquidity variables helps predict bankruptcies for chaebol-firms, suggesting that liquidity constraints are more stringent for non-chaebol. Thus, in a systemic crisis it is not only the strong/healthy that survive.

Suggested Citation

Ferri, Giovanni and Bongini, Paola and Hahm, Hongjoo, Corporate Bankruptcy in Korea: Only the Strong Survive?. The Financial Review, November 2000. Available at SSRN: https://ssrn.com/abstract=246347

Giovanni Ferri (Contact Author)

LUMSA University ( email )

Via della Traspontina
Roma, Rome 00192
Italy

HOME PAGE: http://www.lumsa.it/giovanni-ferri

Paola Bongini

Università degli Studi di Milano-Bicocca ( email )

piazza dell'Ateneo Nuovo 1
Milano, 20126
Italy
+39 0264483012 (Phone)

Hongjoo Hahm

World Bank

1818 H Street, N.W.
Washington, DC 20433
United States

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