Capital Structure in South Korea: A Quantile Regression Approach

30 Pages Posted: 5 Dec 2003

See all articles by Bassam Fattouh

Bassam Fattouh

University of London - School of Oriental and African Studies (SOAS); University of London - Centre for Financial and Management Studies (CeFIMS)

Pasquale Scaramozzino

University of Rome II - Faculty of Economics; University of London - School of Oriental and African Studies (SOAS); University of London - Centre for Financial and Management Studies (CeFIMS)

Laurence Harris

University of London - Centre for Financial and Management Studies (CeMIS)

Date Written: November 2003

Abstract

Knowledge of how South Korean firms choose their capital structures has particular value due to the country's specific corporate structure and the role of leverage in the evolution of its financial crisis of 1997. Using a large panel for the years 1992-2001 we investigate the evolution and determinants of South Korean firms' capital structure and focus on the differences between firms in different quantiles of the debt-capital distribution. Although regression estimates find that standard variables for asymmetric information costs explain South Korean firms' debt-capital ratios, conventional techniques using conditional means of the variables do not take full account of the heterogeneity of the sample of firms. Conditional quantile regressions show that while variables associated with standard models are significant throughout the distribution, there are considerable differences, including differences in sign, in their impact on firms with different levels of leverage. Those observed non-linearities in the determinants of capital structure are consistent with a model of capital structure that includes both costs resulting from asymmetric information and an upper bound on the debt-capital ratio.

Keywords: Capital structure, Quantile regression , South Korea

JEL Classification: G32, O53

Suggested Citation

Fattouh, Bassam and Scaramozzino, Pasquale and Harris, Laurence, Capital Structure in South Korea: A Quantile Regression Approach (November 2003). Available at SSRN: https://ssrn.com/abstract=474941 or http://dx.doi.org/10.2139/ssrn.474941

Bassam Fattouh (Contact Author)

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
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University of London - Centre for Financial and Management Studies (CeFIMS)

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Pasquale Scaramozzino

University of Rome II - Faculty of Economics ( email )

Via Columbia n.2
Rome, 00100
Italy

University of London - School of Oriental and African Studies (SOAS) ( email )

Thornhaugh Street
Russell Square: College Buildings 541
London, WC1H 0XG
United Kingdom

University of London - Centre for Financial and Management Studies (CeFIMS)

Thornhaugh Street
London, WC1H 0XG
United Kingdom

Laurence Harris

University of London - Centre for Financial and Management Studies (CeMIS)

Thornhaugh Street
London, WC1H 0XG
United Kingdom

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