• KDI Journal of Economic Policy
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• v.13 no.1
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• pp.35-63
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• 1991

Currently, Korea's banking industry holds a sizable amount of non-performing loans which stem from the government-led bailout of many troubled firms in the 1980s. Although this burden was somewhat relieved with the aid of banks' recapitalization in the booming securities market between 1986-88, the insolvent credits still resulted in low profitability in the banking sector and have been detrimental to the progress of financial liberalization and internationalization. This paper surveys the corporate bailout experiences of major advanced countries and Korea in the past and derives a rationale for readjustment measures against non-performing loans, in which rescue plans depend on the nature of the financial system. Considering the features of Korea's financial system and the banking sector's recent performance, it discusses possible means of liquidation in keeping with the rationale. The conflict of interests among parties involved in non-performing loans is widely known as one of the major constraints in writing off the loans. Specifically, in the case of Korea, the government's excessive intervention in allocating credits has preempted the legitimate role of the banking sector, which now only passively manages its past loans, and has implicitly confused private with public risk. This paper argues that to minimize the incidence of insolvent loan readjustment, the government's role should be reduced and that the correspondent banks should be more active in the liquidation process, through the market mechanism, reflecting their access to detailed information on the troubled firms. One solution is that banks, after classifying the insolvent loans by the lateness or possibility of repayment, would swap the relatively sound loans for preferred stock and gradually write off the bad ones by expanding the banks' retained earnings and revaluing the banks' assets. Specifically, the debt-equity swap can benefit both creditors and debtors in the sense that it raises the liquidity and profitability of bank assets and strengthens the debtor's financial structure by easing the debt service burden. Such a creditor-led or market-led solution improves the financial strength and autonomy of the banking sector, thereby fostering more efficient resource allocation and risk sharing.

• Asia pacific journal of information systems
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• v.19 no.2
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• pp.157-178
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• 2009

Corporate credit rating is a very important factor in the market for corporate debt. Information concerning corporate operations is often disseminated to market participants through the changes in credit ratings that are published by professional rating agencies, such as Standard and Poor's (S&P) and Moody's Investor Service. Since these agencies generally require a large fee for the service, and the periodically provided ratings sometimes do not reflect the default risk of the company at the time, it may be advantageous for bond-market participants to be able to classify credit ratings before the agencies actually publish them. As a result, it is very important for companies (especially, financial companies) to develop a proper model of credit rating. From a technical perspective, the credit rating constitutes a typical, multiclass, classification problem because rating agencies generally have ten or more categories of ratings. For example, S&P's ratings range from AAA for the highest-quality bonds to D for the lowest-quality bonds. The professional rating agencies emphasize the importance of analysts' subjective judgments in the determination of credit ratings. However, in practice, a mathematical model that uses the financial variables of companies plays an important role in determining credit ratings, since it is convenient to apply and cost efficient. These financial variables include the ratios that represent a company's leverage status, liquidity status, and profitability status. Several statistical and artificial intelligence (AI) techniques have been applied as tools for predicting credit ratings. Among them, artificial neural networks are most prevalent in the area of finance because of their broad applicability to many business problems and their preeminent ability to adapt. However, artificial neural networks also have many defects, including the difficulty in determining the values of the control parameters and the number of processing elements in the layer as well as the risk of over-fitting. Of late, because of their robustness and high accuracy, support vector machines (SVMs) have become popular as a solution for problems with generating accurate prediction. An SVM's solution may be globally optimal because SVMs seek to minimize structural risk. On the other hand, artificial neural network models may tend to find locally optimal solutions because they seek to minimize empirical risk. In addition, no parameters need to be tuned in SVMs, barring the upper bound for non-separable cases in linear SVMs. Since SVMs were originally devised for binary classification, however they are not intrinsically geared for multiclass classifications as in credit ratings. Thus, researchers have tried to extend the original SVM to multiclass classification. Hitherto, a variety of techniques to extend standard SVMs to multiclass SVMs (MSVMs) has been proposed in the literature Only a few types of MSVM are, however, tested using prior studies that apply MSVMs to credit ratings studies. In this study, we examined six different techniques of MSVMs: (1) One-Against-One, (2) One-Against-AIL (3) DAGSVM, (4) ECOC, (5) Method of Weston and Watkins, and (6) Method of Crammer and Singer. In addition, we examined the prediction accuracy of some modified version of conventional MSVM techniques. To find the most appropriate technique of MSVMs for corporate bond rating, we applied all the techniques of MSVMs to a real-world case of credit rating in Korea. The best application is in corporate bond rating, which is the most frequently studied area of credit rating for specific debt issues or other financial obligations. For our study the research data were collected from National Information and Credit Evaluation, Inc., a major bond-rating company in Korea. The data set is comprised of the bond-ratings for the year 2002 and various financial variables for 1,295 companies from the manufacturing industry in Korea. We compared the results of these techniques with one another, and with those of traditional methods for credit ratings, such as multiple discriminant analysis (MDA), multinomial logistic regression (MLOGIT), and artificial neural networks (ANNs). As a result, we found that DAGSVM with an ordered list was the best approach for the prediction of bond rating. In addition, we found that the modified version of ECOC approach can yield higher prediction accuracy for the cases showing clear patterns.

• The Korean Journal of Air & Space Law and Policy
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• v.33 no.2
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• pp.3-34
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• 2018

Korea's air transport industry has a 70-year history since Korea National Airline was establishment in October 1948. Korea has 9 airlines which have international air transport business licenses, and as of 2017, air transport performance(Domestic & International) is ranked 8th in the world. Through analysis of Korea's air transport industry, this paper examines the essential problems of the domestic air transport industry and what policies and laws should be supplemented, and presents an "Policy Directions for the Air Transport Industry" that can continue to grow into a global aviation leading country in the future. Analysis of aviation statistics shows that the nation's air transport industry has a very high growth rate, and national airlines continue to invest in sustainable growth. Furthermore, new companies are also trying to enter the market. As of November 2018, four companies applied for licenses for international air transport business, one for international air transport business (cargo) license, and the Ministry of Land, Infrastructure and Transport is expected to decide whether to issue the license by first quarter of 2019. While some expect price reductions and consumer benefits through competition promotion, others worry about worsening airline financial structures and reducing safety investment due to competition. To sum up the problems of the nation's air transport industry, first, low-cost airlines focus only on attracting domestic demand, and thus have a weak foundation for continued growth. Second, the rapid growth in recent years has led to the lack of aviation professionals such as pilots and technicians and the saturation of slots at major airports. Third, since the financial soundness of airlines is not systematically managed, the financial situation of airlines can quickly deteriorate and the damage can be attributed to consumers. In order for the national airlines to continue to develop, the first is to focus on the endless demand of the global aviation market and to secure international competitiveness. Second, the government should support the airline infrastructure according to the size of the air transport industry, third, we will systematically nurture aviation experts who will lead the future of the nation's air transport industry, and finally, the government will have to continuously manage the financial status of airlines to prevent consumer damage in advance. Nowadays the air transport industry has become very competitive. Not only do airlines have to work hard for the sustainable development of national airlines, but all government agencies must support our airline companies in policy to win international competition.

• Asia Marketing Journal
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• v.13 no.4
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• pp.227-251
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• 2012

This study analyzed Woori Investment and Securities' industry-leading marketing from both a brand management and a marketing decision-making perspective. By executing a different marketing strategy from its competitors, Woori Investment and Securities recognized recent changes in the asset management and investment markets as an open opportunity, and quickly responded to the market changes. First, the company launched the octo brand as a multi-account product, two years before its competitors offered their own products. In particular, it created a differentiated brand image, using the blue octopus character, which became familiar to the general financial community, and was consistently employed as part of an integrated marketing communications strategy. Second, it executed a brand expansion strategy by sub-branding octo in a variety of new financial products, responding to rapid changes in the domestic financial and asset management markets. Through this strategic evolution, the octo brand became a successful wealth management brand and representative of Woori Investment & Securities. Third, it has converged market research, demand and trend analysis, and customer needs acquired through various customer contact channels into a marketing perspective. Thus, marketing has participated in the product development stage, a rarity in the finance industry. Woori Investment and Securities has a leading marketing system. The heart of the successful product creation lies in a collaboration of their customer bases among the finance companies in the Woori Financial Group. The present study suggested a corresponding strategy for octo brand, which is expected to enter into the maturity stage of its product life cycle. In addition, this study found a need to modify the current positioning strategy in order to position and preserve sustainability in the increasingly competitive asset management market. It also suggested the need for an offensive strategy to counter the number one M/S company, and address the issue of cannibalism in the Woori Financial Group.

• The Korean Journal of Financial Management
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• v.24 no.2
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• pp.41-79
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• 2007

This study examines the expiration-day effects of stock index futures and options in the Korean stock market. The so-called 'expiration-day effects', which are the abnormal stock price movements on derivatives expiration days, arise mainly from cash settlement. Index arbitragers have to bear the risk of their positions unless they liquidate their index stocks on the expiration day. If many arbitragers execute large buy or sell orders on the expiration day, abnormal trading volumes are likely to be observed. If a lot of arbitragers unwind positions in the same direction, temporary trading imbalances induce abnormal stock market volatility. By contrast, if some information arrives at market, the abnormal trading activity must be considered a normal process of price discovery. Stoll and Whaley(1987) investigated the aggregate price and volume effects of the S&P 500 index on the expiration day. In a related study, Stoll and Whaley(1990) found a similarity between the price behavior of stocks that are subject to program trading and of the stocks that are not. Thus far, there have been few studies about the expiration-day effects in the Korean stock market. While previous Korean studies use the KOSPI 200 index data, we analyze the price and trading volume behavior of individual stocks as well as the index. Analyzing individual stocks is important for two reasons. First, stock index is a market average. Consequently, it cannot reflect the behavior of many individual stocks. For example, if the expiration-day effects are mainly related to a specific group, it cannot be said that the expiration of derivatives itself destabilizes the stock market. Analyzing individual stocks enables us to investigate the scope of the expiration-day effects. Second, we can find the relationship between the firm characteristics and the expiration-day effects. For example, if the expiration-day effects exist in large stocks not belonging to the KOSPI 200 index, program trading may not be related to the expiration-day effects. The examination of individual stocks has led us to the cause of the expiration-day effects. Using the intraday data during the period May 3, 1996 through December 30, 2003, we first examine the price and volume effects of the KOSPI 200 and NON-KOSPI 200 index following the Stoll and Whaley(1987) methodology. We calculate the NON-KOSPI 200 index by using the returns and market capitalization of the KOSPI and KOSPI 200 index. In individual stocks, we divide KOSPI 200 stocks by size into three groups and match NON-KOSPI 200 stocks with KOSPI 200 stocks having the closest firm characteristics. We compare KOSPI 200 stocks with NON-KOSPI 200 stocks. To test whether the expiration-day effects are related to order imbalances or new information, we check price reversals on the next day. Finally, we perform a cross-sectional regression analysis to elaborate on the impact of the firm characteristics on price reversals. The main results seem to support the expiration-day effects, especially on stock index futures expiration days. The price behavior of stocks that are subject to program trading is shown to have price effects, abnormal return volatility, and large volumes during the last half hour of trading on the expiration day. Return reversals are also found in the KOSPI 200 index and stocks. However, there is no evidence of abnormal trading volume, or price reversals in the NON-KOSPI 200 index and stocks. The expiration-day effects are proportional to the size of stocks and the nearness to the settlement time. Since program trading is often said to be concentrated in high capitalization stocks, these results imply that the expiration-day effects seem to be associated with program trading and the settlement price determination procedure. In summary, the expiration-day effects in the Korean stock market do not exist in all stocks, but in large capitalization stocks belonging to the KOSPI 200 index. Additionally, the expiration-day effects in the Korean stock market are generally due, not to information, but to trading imbalances.

• The Journal of the Korea Contents Association
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• v.20 no.6
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• pp.38-50
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• 2020

The purpose of this study is to identify the risks to financial institutions in terms of expanding potential risks due to the deferral of exposure, by identifying the structures in which real estate finance and financial institutions affect real estate prices at low interest rates. To this end, real estate financing is categorized according to the method of financing and the type of value measurement from a risk management perspective and analyzed for each case. As a result of analysis, in the case of profitable real estate, the rate of real estate is increased by directly decreasing the cap rate and directly affecting the fair value calculation method. In the case of non-profitable real estate, the real estate price is increased by expanding the leverage width of investors or financial institutions. Through the analysis of this case, the continuous increase in real estate prices over the past 10 years has the potential to prevent financial institutions from losing under the circumstances such as the growth of real estate finance due to the advancement of the financial market and the continued low interest rate trend that has continued for 10 years. It is judged that the deferred delay is part of the cause, which leads to an increase in the risk to financial institutions.

• Journal of Technology Innovation
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• v.25 no.4
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• pp.239-261
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• 2017

This paper analyzes how corporate product innovation affects firms' revenue and financial stability, and thereby draws the implications for the corporate strategy for sustainable growth. Corporate product innovation is defined as the development of new products within the firm, including bought-in products. Corporate revenue is measured by per capita sales and its growth rate, while financial stability is measured by debt-to-equity ratio and liquidity ratio. In the empirical analysis, the two-stage estimation method was used to control for the endogeneity of new product development. The data are drawn from the first (2005) to the sixth (2015) wave of the Human Capital Corporate Panel (HCCP) Survey, which are matched to the data from the Korea Investors Service (KIS). The results of the first-stage estimation indicate that product innovation of the firm is promoted by the firm's knowledge capital stock, human resources investment, and market-leading strategy. The second-stage estimation results indicate a positive relationship between the firm's level of activity in product innovation and short-term revenue (per capita sales and its growth), and financial stability (lower debt-to-equity ratio and higher liquidity ratio). These findings confirm that the firm's investment in technology innovation and subsequent product innovation are important strategies to enhance both short-term corporate revenue and long-term financial stability.

• Land and Housing Review
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• v.5 no.4
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• pp.259-269
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• 2014

After global financial crisis, the ratio of household debt to GDP was decreasing in other advanced countries such as the U.S., and the U.K. and so on. But, in Korea, household debt (of which residential mortgage loan account for a large part) ratio is still increasing. This paper focuses on the scale and characteristics of households in negative housing equity (those are called House-poors in Korea), and also the socio-economic backgrounds of the formation process. In financial perspective, the problem of negative housing equity depends on financial debt repayment capability. We used DSR (Debt Service Ratio) and LTA (Loan to Asset ratio) as financial indicators to evaluate the debt repayment capability. The critical value of DSR is assumed as 40%, and LTA 100%. The socio-economic backgrounds of the House-poors are as follows : increasing households debt dependency, over lending competition of financial institutions and unreasonable loan in household economy, instability of real estate market, week regulation on mortgage loan. Finally, this paper suggests some implications about the range and the target of public intervention.

• Land and Housing Review
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• v.4 no.1
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• pp.43-54
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• 2013

This This paper investigates the variation of the factors to determinate housing price in Seoul metropolitan area after sub-prime financial crisis, in Korea, using a VAR model. The model includes housing price and housing rent (Jeonse) in Seoul metropolitan area from 1999 to 2011, and uses interest rate, real GDP, KOSPI, Producer Price Index and practices to impulse response and variance decomposition analysis to grasp the dynamic relation between a variable of macro economy and and a variable of housing price. Data is classified to 2 groups before and after the 3rd quater of 2008, when sub-prime crisis occurred; one is from the 1st quater of 1999 to the 3rd quater of 2008, and the other is from the 2nd quater of 1999 and the 4th quater of 2011. As a result, comparing before and after sub-prime crisis, housing price is more influenced by its own variation or Jeonse price's variation instead of interest rate and KOSPI. Both before and after sub-prime financial crisis, Jeonse price is also influenced by its own variation and housing price. While after sub-prime financial crisis, influences of Producer Price Index, KOSPI and interest rate were weakened, influence of real GDP is expanded. As housing price and housing rent are more influenced by real economy factors such as GDP, its own variation than before sub-prime financial crisis, the recent trend that the house prices is declined is difficult to be converted, considering domestic economic recession and uncertainty, continued by Europe financial crisis. In the future to activate the housing business, it ia necessary to promote purchasing power rather than relaxation of financial and supply regulation.

• Journal of Distribution Science
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• v.6 no.1
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• pp.63-77
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• 2008

The source of a business competition is man and the core of a business success depends on people's ability, efforts and cooperation. Therefore, modern managers are making varied efforts to perform the ethical management for the organization immersion and job satisfaction of the employees. The managers of the financial agencies including the enterprises competing in the global market, face numerous ethical issues and problems. Considering the reality that financial institutions are actively asked to perform the responsibility and duties sincerely, the tasks how the head of financial agency will accept the social study of the level of ethics and change the level of recognition, and how he will settle it as the natural feature in the institution, become an important management target. In addition, it is necessary to figure out how the ethical management of the head of the financial agency will affect the organizational immersion of the employees. Based on the objective of this study, we attempted to confirm how the ethical management will of the head of the financial institution would affect the organizational immersion, the employees' mental result variables. Through this study, it became necessary for the directors of the financial institutions to search for the methods to improve the system of management and enhance the observance will of the business ethics so that they may not cause the disposition of the violation of the business ethics owing to the enforcement to achieve the target of the results of the business or the error recognition of the norm. Further, the heads of banks will have to set a management policy focused on the democratic management and the ethical justice based on the participating methods to induce the cooperative commitment of the stock company employees not to be shifted from the globalization and the competitive society.