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Assessing competitive conditions in Korea's credit rating industry after the 1997 financial crisis

Author

Listed:
  • Frederick Dongchuhl Oh

    (Korea Advanced Institute of Science and Technology)

Abstract

Investigating the market structure of Korea's credit rating industry during the 1990-2007 period, this paper utilizes the Rosse-Panzar methodology to evaluate the Korean government's financial restructuring policy for fostering the competitive condition in the credit rating industry after the 1997 financial crisis. We find that the degree of market competition in the credit rating industry increased after the implementation of the Korean government's financial restructuring policy. Our analysis indicates that after the financial restructuring process the market structure of Korea's credit rating industry became an oligopoly in a contestable market, which is economically equivalent to the structure of perfect competition.

Suggested Citation

  • Frederick Dongchuhl Oh, 2014. "Assessing competitive conditions in Korea's credit rating industry after the 1997 financial crisis," Economics Bulletin, AccessEcon, vol. 34(2), pages 1114-1121.
    • Handle: RePEc:ebl:ecbull:eb-14-00183
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2014/Volume34/EB-14-V34-I2-P103.pdf
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    References listed on IDEAS

    as
    1. Panzar, John C & Rosse, James N, 1987. "Testing for "Monopoly" Equilibrium," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 443-456, June.
    2. Shaffer, Sherrill, 1983. "The Rosse-Panzar statistic and the Lerner index in the short run," Economics Letters, Elsevier, vol. 11(1-2), pages 175-178.
    3. Becker, Bo & Milbourn, Todd, 2011. "How did increased competition affect credit ratings?," Journal of Financial Economics, Elsevier, vol. 101(3), pages 493-514, September.
    4. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    5. Luis Gutiérrez de Rozas, 2007. "Testing for competition in the Spanish banking industry: The Panzar-Rosse approach revisited," Working Papers 0726, Banco de España.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Joe, Denis Yongmin & Oh, Frederick Dongchuhl, 2018. "Credit ratings and corporate cash holdings: Evidence from Korea’s corporate reform after the 1997 Asian financial crisis," Japan and the World Economy, Elsevier, vol. 45(C), pages 9-18.
    2. Nelson Camanho & Pragyan Deb & Zijun Liu, 2022. "Credit rating and competition," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 2873-2897, July.
    3. Denis Yongmin Joe & Frederick Dongchuhl Oh, 2017. "Did Foreign Ownership Of Korean Credit Rating Agencies Improve Their Ratings?," Contemporary Economic Policy, Western Economic Association International, vol. 35(1), pages 193-200, January.
    4. Denis Yongmin Joe & Frederick Dongchuhl Oh, 2018. "Spillover Effects Within Business Groups: The Case of Korean Chaebols," Management Science, INFORMS, vol. 64(3), pages 1396-1412, March.
    5. Bereskin, Frederick L. & Kim, Bushik & Oh, Frederick Dongchuhl, 2015. "Do credit rating concerns lead to better corporate governance? Evidence from Korea," Pacific-Basin Finance Journal, Elsevier, vol. 35(PB), pages 592-608.

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    More about this item

    Keywords

    Credit rating; Competition; Contestability; Rosse-Panzar test;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • G2 - Financial Economics - - Financial Institutions and Services

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