Bank Loans to Financially Distressed Firms: Empirical Evidence from Korean Manufacturing Sectors from 1980 to 2010
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This study investigates how bank behaviors have changed with regard to giving additional loans to financially distressed firms by looking at the case of Korean manufacturing companies from 1980 to 2010. Through consideration of both firm characteristics and economic conditions, three main results are obtained. First, we find that South Korean banks had been giving additional loans to troubled firms both before and for a decade after the Seoul Olympics of 1988. However, no additional lending to unhealthy firms was observed after the Asian financial crisis of 1997. Second, big business groups in poor financial condition received additional credit after the 1988 Seoul Olympics. However, lending practices that used to be common for such businesses were no longer found after 1997. Third, SMEs or export-oriented firms experiencing financial distress were more likely to receive additional funds after the crises of 1997 and 2008 than at other times during the period under investigation.
Abstract
This study investigates how bank behaviors have changed with regard to giving additional loans to financially distressed firms by looking at the case of Korean manufacturing companies from 1980 to 2010. Through consideration of both firm characteristics and economic conditions, three main results are obtained. First, we find that South Korean banks had been giving additional loans to troubled firms both before and for a decade after the Seoul Olympics of 1988. However, no additional lending to unhealthy firms was observed after the Asian financial crisis of 1997. Second, big business groups in poor financial condition received additional credit after the 1988 Seoul Olympics. However, lending practices that used to be common for such businesses were no longer found after 1997. Third, SMEs or export-oriented firms experiencing financial distress were more likely to receive additional funds after the crises of 1997 and 2008 than at other times during the period under investigation.
참고문헌 (10)
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