• KDI Journal of Economic Policy
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• v.46 no.1
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• pp.91-129
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• 2024

The Bank of Korea, through a legal amendment in 2011 following the financial crisis, was entrusted with the additional responsibility of financial stability beyond its existing mandate of price stability. Since then, concerns have been raised about the prolonged increase in household debt compared to income conditions, which could constrain consumption and growth and increase the possibility of a crisis in the event of negative economic shocks. The current accumulation of financial imbalances suggests a critical period for the government and central bank to be more vigilant, ensuring it does not impede the stable flow of our financial and economic systems. This study examines the applicability of the Integrated Inflation Targeting (IIT) framework proposed by the Bank for International Settlements (BIS) for macro-financial stability in promoting long-term economic stability. Using VAR models, the study reveals a clear increase in risk appetite following interest rate cuts after the financial crisis, leading to a rise in household debt. Additionally, analyzing the central bank's conduct of monetary policy from 2000 to 2021 through DSGE models indicates that the Bank of Korea has operated with a form of IIT, considering both inflation and growth in its policy decisions, with some responsiveness to the increase in household debt. However, the estimation of a high interest rate smoothing coefficient suggests a cautious approach to interest rate adjustments. Furthermore, estimating the optimal interest rate rule to minimize the central bank's loss function reveals that a policy considering inflation, growth, and being mindful of household credit conditions is superior. It suggests that the policy of actively adjusting the benchmark interest rate in response to changes in economic conditions and being attentive to household credit situations when household debt is increasing rapidly compared to income conditions has been analyzed as a desirable policy approach. Based on these findings, we conclude that the integrated inflation targeting framework proposed by the BIS could be considered as an alternative policy system that supports the stable growth of the economy in the medium to long term.

• Proceedings of the Korean Institute of Building Construction Conference
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• 2011.11a
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• pp.69-70
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• 2011

During the financial crisis in the late 1990s, we witnessed the large corporations failing at one moment. It is clear that the debt-dependant size augmentation and duplicate investment, and the failure in fund liquidity adjustment were the greatest causes rather than the long-term strategic advantage. Such fact, however, has led to the introduction of advanced financial techniques and security/management of fund liquidity. In order to propose a method to secure fund liquidity at the construction level, this study considers the documentational/precedent studies on project financing among fund procurement methods. And the fund liquidity status at construction level is investigated domestically/internationally to analyze the fund flow. Finally, the actual data is used to analyze progress rate and sales rate to end with the proposal of the method to secure fund liquidity in the progression of this study.

• Korean Management Science Review
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• v.30 no.2
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• pp.1-10
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• 2013

Case studies are made to investigate the relationship between the accuracy of energy production estimation and project feasibility indicators such as rate of return on equity (ROE) and debt service coverage ratio (DSCR) for three wind farm projects. It is found out that 1% improvement in the accuracy of energy production estimation may enhance the ROE by more than 0.5% in the case of P95, thanks to improved financing terms. AHP survey shows that MCP correlation of measured in situ wind data with long term wind speed distribution and hands-on experiences of flow analysis are more important than other factors for more precise annual energy production estimation.

• Proceedings of the Korean Institute of Navigation and Port Research Conference
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• 2007.12a
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• pp.58-59
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• 2007

The English law of ship mortgages is successor to a very long tradition. From the earliest times loans have been required to finance maritime commerce. The term "ship" describes any kind of vessel used in navigation, while the term "ship mortgage" described a method of secured financing, under which a borrower transferred its interest in ship or other property to a creditor, to secure the payment of the debt owed by the borrower or the performance of some their obligation. The shipowner (the borrower)is known as the 'mortgagor, and the person lending the money is known as the 'mortgagee'.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.7
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• pp.59-72
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• 2020

This paper examines whether lending structure can lower credit risk by employing econometric techniques of panel data for the Vietnamese banking system at the bank level used by economic sectors from 2011 to 2016. New light is being shed on assessing the impact of each industry's debt outstanding on credit risk. Adopting findings from previous studies, we assess credit risk from two different sources, including loan loss provision and non-performing loan. Moreover, we also focus on observing lending structure in many different aspects, from concentrative levels to the short-term and long-term stability levels of lending structure. The Generalized Method of Moments (GMM) estimator was applied to analyze the relationship between concentration and banking risks. In general, the results show that lending concentration may decrease credit risk. It is interesting to observe that the Vietnamese commercial bank lending portfolios have, on average, higher levels of diversity across different sectors. In particular, the increase in hotel and restaurant lending contributes to decrease credit risk while the lending portfolios of banks in agriculture, electricity, gas and water increase credit risk. This study suggests the need for further analysis and research about portfolio risks in lending activities for maintaining efficiency and stability in the commercial banking system.

• Journal of Navigation and Port Research
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• v.45 no.6
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• pp.276-283
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• 2021

The capital structure of the shipping business, which is characterized by its capital intensity and extreme market volatility, is closely related to long-term stability. Research in this area has been conducted mostly in the form of deriving the determinants of capital structure from company-wise financial ratios. This research, on the other hand, has a different approach to the topic. It identifies the relationship between actual cash profit and loss and other variables - i.e. actual vessel prices, interest rates and leverage ratio - by employing historical simulation. The result demonstrates that the P anamax cash profit shows 0 (break-even point) when the debt weight reaches 64.38% (debt ratio 180.74%) and the Cape, 73.04% (debt ratio 270.92%). Additionally, the ships of different types show a divided pattern for the pre- and post-'Super Boom'. It indicates that the business area and the market cycle should be considered when a leverage strategy is established. This research benefits shipping companies set a rational leverage strategy as well as delivers a reasonable guideline to government authorities for the development of a sound policy on shipping finance.

• Health Policy and Management
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• v.18 no.2
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• pp.19-38
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• 2008

Financial ratios are key indicators of an organization's financial and business conditions. Among various financial indicators, profitability, financial structure, financial activity and liquidity ratios are frequently used and analyzed. Using the structural equation modeling(SEM) technique, this study examines the structural causal relationships among key financial indicators. Data for this study are taken from complete financial statements from 142 hospitals that passed the standardization audit undertaken by the Korean Hospital Association from 1998 to 2001 for the purpose of accrediting teaching hospitals. In order to improve comparability, ratio values are standardized using the Blom's normal distribution. The final model of the SEM has four latent constructs: financial activity(total asset turnover, fixed asset turnover), liquidity(current ratio, quick ratio, collection period), financial structure(total debt to equity, long-term debt to equity, fixed assets to fund balance), and profitability(return on assets, normal profit to total assets, operating margin to gross revenue, normal profit to gross revenue). While examining several model fit indices(Chi-square (df) = 178.661 (40), likelihood ratio=4.467, RMR=.11, GFI=.849, RMSEA=.157), the final SEM we employed shows a relatively good fit. After examining the path coefficient of the constructs, the financial structure of the hospital affects the hospital's profitability in a statistically significant way. A hospital which utilizes its liabilities, more specifically fixed liabilities, and makes a stable investment decision for fixed assets was found to have a higher profitability than other hospitals. Then, the standard path coefficients were examined to directly compare the influence of variables. It was found that there were no statistically significant path coefficients among constructs. When it comes to variables, however, statistically significant relationships were found. between. financial activity and. fixed. asset turnover, and between profitability and normal profit to gross revenue. These results show that the observed variables of fixed asset turnover and normal profit to gross revenue can be used as indicators representing financial activity and profitability.

• Korean Journal of Construction Engineering and Management
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• v.16 no.6
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• pp.84-91
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• 2015

Project Financing (PF) is a financing method, executed based upon the projected profitability from a project itself instead of relying on the credit rating of project sponsors or any type of collateral. However, most financial institutions of Korea lacks the long term profitability assessment capability, and they prefer to acquire credit reinforcement from the construction companies in the form of the guarantor or debt argument commitments. As a result, PF contingent liabilities as an indirect debt, are burdened to the construction companies. Even though the PF contingent liabilities are not supposed to be part of the financial statements, they became a mandatory disclosure items since 2009. In this study, PF contingent liabilities were studied to indicate how they were correlated with construction firms' financial ratios. Construction firms were grouped by their credit rating and each group was compared in order to analyze PF contingent liabilities' impact on the financial condition of the company in terms of liquidity, liability, and stability.

• 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.

• The Korean Journal of Financial Management
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• v.23 no.2
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• pp.109-141
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• 2006

The central factor in the pecking order theory of financial structure is the asymmetric distribution of information between managers and less-informed outside investors. Myers and Majluf (1984) show that this asymmetry leads managers to prefer internal funds to external funds. Funds are raised through equity issues only after the capacity to issue debt has been exhausted. In contrast, according to static tradeoff theory, an optimum financial structure exists by the tradeoff between tax saving by debt and bankruptcy costs. This study examines the recent changes of Korean firms' financial structure and financing behavior and the determinants of financial structure. The sample of firms comes from the period of $1996{\sim}2004$, and the number of firms is 32,003. The major findings are as follows. First, in contrast with previous studies using US firms as sample, Korean firms have been using debt financing as their major financing instrument. Especially, the firms in the fund deficit situation relies much more on $long{\sim}term$ and $short{\sim}term$ debts rather than on equity issues. Second, as is the case with previous studies using US firms sample indicates, the financing deficit variable can not explain perfectly the net debt issue. However, compared with net equity issue variable, net debt issue variable is more closely related to the financing deficit variable. Third, when financing deficit variable is added to the current list of explanatory variables of financial structure determinants model, it has a significant and positive explanatory power. In addition, the coefficients of determinants are much improved. Thus, it is concluded that although pecking order theory is not perfect, it appears to be more useful compared to static tradeoff theory, at least in explaining the recent financing behavior of Korean manufacturing firms.