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A Microdata Analysis of Recent Corporate Investment in Korea (in Korean)

Author

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  • Kiseok Hong

    (Department of Economics, Ewha Womans University)

Abstract

This paper examines empirically why corporate investment in Korea has been so sluggish since the 1997 currency crisis. In particular, it estimates an investment equation using firm-level data, with particular emphasis on the debt burden of the corporate sector. Estimation results show, first, that the effects of the debt/asset ratio on investment are larger and more significant in the post-crisis period than in the pre-crisis period. Second, the effects of overall uncertainty (as measured by standard deviations of stock returns or operating profit) are not notably stronger in the post-crisis period. Third, institutional changes such as increased foreign ownership and increased dividend payouts do not appear to be critical, either. These results support the view that the recent investment slowdown is mainly related with downside risk concerning the debt/asset ratio.

Suggested Citation

  • Kiseok Hong, 2006. "A Microdata Analysis of Recent Corporate Investment in Korea (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 12(1), pages 1-52, March.
    • Handle: RePEc:bok:journl:v:12:y:2006:i:1:p:1-52
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    File URL: http://imer.bok.or.kr/attach/imer_kor/2545/2013/12/1386634792780.pdf
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    Citations

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    Cited by:

    1. Maurice Obstfeld & Dongchul Cho & Andrew Mason (ed.), 2012. "Global Economic Crisis," Books, Edward Elgar Publishing, number 14951.
    2. Kyung-Mook Lim, 2012. "Structural Fundamentals of Korean Corporations: This Time Was Different," Chapters, in: Maurice Obstfeld & Dongchul Cho & Andrew Mason (ed.), Global Economic Crisis, chapter 11, Edward Elgar Publishing.

    More about this item

    Keywords

    corporate investment; investment slowdown; debt/asset ratio; currency crisis;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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