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Financial Structure of South Korea's Chaebol: A Flow-of-Funds Approach

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  • Kim, Jiyoung

Abstract

The chaebol, a South Korean form of business conglomerate, has been a key factor in the country's economic growth. In this study, the chaebol sector is added to the asset-liability matrix derived from a flow-of-funds (FOF) analysis in order to explain the role of the chaebol in the Korean financial system. We find that the power-of-dispersion indices in the asset-oriented system differ between the chaebol and other private corporations. Between 1987 and 2002, the former has increased while the latter has declined. In the case of the chaebol, excess liabilities were reduced, while investments in financial assets were increased. This tendency led to an increase in the power-of-dispersion index in this asset-oriented system. Our previous research found a decrease in this index for the private sector in Korea. However, the index increased for chaebol when the private sector is divided into the chaebol and small/medium-sized corporations in this paper. These results point to a greater concentration of economic power in the chaebol in the Korean financial market.

Suggested Citation

  • Kim, Jiyoung, 2017. "Financial Structure of South Korea's Chaebol: A Flow-of-Funds Approach," IDE Discussion Papers 628, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper628
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    More about this item

    Keywords

    Business enterprises; Large-scale enterprises; Finance; Financial market; South Korea; Flow-of-funds analysis; Asset-liability matrix; Financial conglomerates (chaebol);
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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