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Financial Leverage of Korean Business Conglomerates "Chaebols" in the Post-Asian Financial Crisis

아시아 금융위기 이후의 한국 재벌기업들의 부채비율 고찰

  • Kim, Han-Joon (Dept. of Business Administration, Hoseo University)
  • 김한준 (호서대학교 사회과학대학 경영학과)
  • Received : 2011.01.19
  • Accepted : 2011.02.10
  • Published : 2011.02.28

Abstract

This study is to perform several major analyses to find any differences in the leverage between the pre- and post-period of the currency crisis. Moreover, another aspect is to investigate a financial aspect which has received relatively little attention to the firms and/or industries in the emerging capital markets in comparison to those in the advanced markets. The purpose of this empirical study is to confirm whether or not, it is myth or reality that Korean business conglomerate, chaebol, firms with subsidized financing from government-owned domestic financial institutions in the pre-financial turmoil, may still maintain their higher leverage, even after the crisis. It was found that firms belonging to the chaebol in Korea maintained higher average book-value and market-value based debt ratios, relative to their counterparts not belonging to the chaebol across all of the tested models. There were positive relationships of IND3(=the chemical industry) and Ind5(=the construction industry) to the book-value leverage. This study identified that there were no differences in the explanatory variables included, between the tested models (that is, without and with including the present value of an operating lease) related to each debt ratio. Since the Korean government continue to improve the corporate governance of the domestic firms in terms of accounting transparency and corporate ownership, it would be more efficient, if utilizing this "new" ratio considering an operating lease as an effective measurement of the level of leverage. In terms of the capital structure, it may also be possible for foreign firms to utilize and benefit from the results obtained in this study when operating their new businesses in Korea, given the economic circumstances such as the ongoing progress of the Korea-America FTA or the Korea-China FTA.

Keywords

Korean chaebol;Market-value;Book-value;Leverage;Japanese keiretsu;Asian Financial Crisis

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