The Value of Durable Bank Relationships: Evidence from Korean Banking Shocks

46 Pages Posted: 10 Jan 2001

See all articles by Kee-Hong Bae

Kee-Hong Bae

York University - Schulich School of Business

Jun-Koo Kang

Nanyang Technological University (NTU) - Nanyang Business School

Chan-Woo Lim

Korea University Business School (KUBS)

Date Written: November 2000

Abstract

Using a large sample of exogenous events that negatively affected Korean banks during the 1997-1998 period, we examine the value of durable bank relationships in Korea. We show that adverse shocks to banks have a negative effect not only on the value of the banks themselves, but also on the value of their client firms, and that this adverse effect on firm value is a decreasing function of the financial health of both banks and client firms. Our results are concentrated in the second half of the sample period, when banks experienced severe difficulties.

Keywords: Exogenous events, Bank, Durable bank relationship, Financial health of banks, Main bank, Bank-centered financial systems, Firm value, Bank distress, Nonperforming loan ratio, Banking shocks, Firm characteristics

JEL Classification: G21, G32, G33

Suggested Citation

Bae, Kee-Hong and Kang, Jun-Koo and Lim, Chan-Woo, The Value of Durable Bank Relationships: Evidence from Korean Banking Shocks (November 2000). Available at SSRN: https://ssrn.com/abstract=249440 or http://dx.doi.org/10.2139/ssrn.249440

Kee-Hong Bae

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada
416-736-2100 ext) 20248 (Phone)
416-736-5687 (Fax)

Jun-Koo Kang (Contact Author)

Nanyang Technological University (NTU) - Nanyang Business School ( email )

Nanyang Avenue, Block S3-01b-54
Singapore, 639798
Singapore
(+65) 6790-5662 (Phone)
(+65) 6791-3697 (Fax)

HOME PAGE: http://www.nbs.ntu.edu.sg/nbs_corporate/divisions/bnf/index.asp

Chan-Woo Lim

Korea University Business School (KUBS) ( email )

Anam-Dong, Seongbuk-Gu
Seoul 136-701, 136701
Korea

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