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Chaebol, Financial Liberalization, and Economic Crisis: Transformation of Quasi-Internal Organization in Korea

Author

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  • Chung H Lee

    (Department of Economics, University of Hawaii at Manoa)

  • Keun Lee
  • Kangkoo Lee

Abstract

This paper argues that the Korean governmentís policy with regard to financial deregulation and liberalization was endogenously determined, being largely influenced by the interest politics of perhaps the most powerful interest group in Korea, chaebol. It also argues that the cause of Koreaís financial crisis of 1997-98 cannot be analyzed without first examining the influence of chaebol on the post-1993 financial liberalization, which planted the seeds of the crisis. The paper concludes that financial liberalization undertaken in a haphazard manner, manipulated by a few dominant players in the economy runs into the danger of producing an outcome worse than before.

Suggested Citation

  • Chung H Lee & Keun Lee & Kangkoo Lee, 2000. "Chaebol, Financial Liberalization, and Economic Crisis: Transformation of Quasi-Internal Organization in Korea," Working Papers 200004, University of Hawaii at Manoa, Department of Economics.
    • Handle: RePEc:hai:wpaper:200004
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    References listed on IDEAS

    as
    1. Takatoshi Ito & Anne O. Krueger, 1996. "Financial Deregulation and Integration in East Asia," NBER Books, National Bureau of Economic Research, Inc, number ito_96-1.
    2. Ito, Takatoshi & Krueger, Anne O. (ed.), 1996. "Financial Deregulation and Integration in East Asia," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226386713, September.
    3. Leipziger, D.M. & Petri, P.A., 1993. "Korean Industrial Policy: Legacies of the Past and Directions for the Future," World Bank - Discussion Papers 197, World Bank.
    4. Dalla, I. & Khatkhate, D., 1995. "Regulated Deregulation of the Financial System in Korea," World Bank - Discussion Papers 292, World Bank.
    5. Amsden, Alice H. & Euh, Yoon-Dae, 1993. "South Korea's 1980s financial reforms: Good-bye financial repression (maybe), hello new institutional restraints," World Development, Elsevier, vol. 21(3), pages 379-390, March.
    6. Sang-Woo Nam, 1996. "The Principal Transactions Bank System in Korea and a Search for a New Bank-Business Relationship," NBER Chapters, in: Financial Deregulation and Integration in East Asia, pages 277-306, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Lee, Keonbeom & Peng, Mike W. & Lee, Keun, 2008. "From diversification premium to diversification discount during institutional transitions," Journal of World Business, Elsevier, vol. 43(1), pages 47-65, January.
    2. Jiyoung Kim, 2017. "Corporate financial structure of South Korea after Asian financial crisis: the chaebol experience," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 6(1), pages 1-14, December.
    3. Ahn, JaeBin & Choi, Moon Jung, 2020. "From firm-level imports to aggregate productivity: Evidence from Korean manufacturing firm data," Japan and the World Economy, Elsevier, vol. 56(C).
    4. Jeon, Bang Nam, 2012. "From the 1997-98 Asian financial crisis to the 2008-09 global economic crisis: lessons from Korea’s experience," MPRA Paper 36469, University Library of Munich, Germany.
    5. Kim, Joon-Kyung & Lee, Chung H., 2001. "Insolvency in the Corporate Sector and Financial Crisis in Korea," EIJS Working Paper Series 122, Stockholm School of Economics, The European Institute of Japanese Studies.
    6. Driffield, Nigel & Pal, Sarmistha, 2006. "Do external funds yield lower returns?: Recent evidence from East Asian economies," Journal of Asian Economics, Elsevier, vol. 17(1), pages 171-188, February.
    7. Kim, Euysung, 2006. "The impact of family ownership and capital structures on productivity performance of Korean manufacturing firms: Corporate governance and the "chaebol problem"," Journal of the Japanese and International Economies, Elsevier, vol. 20(2), pages 209-233, June.
    8. Lee, Keun, 2020. "Varieties of Capitalism and re-thinking the East Asian model of economic growth after the Covid-19 pandemic: Rebalancing shareholder and stakeholder capitalism," MPRA Paper 110770, University Library of Munich, Germany.
    9. Dong-Hwan Kim & Jesse Campbell, 2015. "Development, Diversification, and Legitimacy: Emergence of the Committee-Based Administrative Model in South Korea," Public Organization Review, Springer, vol. 15(4), pages 551-564, December.
    10. Chung Lee, 2005. "The Political Economy of Institutional Reform in Korea," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 10(3), pages 257-277.
    11. Tarun Khanna & Yishay Yafeh, 2007. "Business Groups in Emerging Markets: Paragons or Parasites?," Journal of Economic Literature, American Economic Association, vol. 45(2), pages 331-372, June.

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    More about this item

    Keywords

    Financial liberalization; The Asian crisis; Chaebol; Government intervention;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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