TY - JOUR
T1 - The Korean financial crisis and the soft budget constraint
AU - Alexeev, Michael
AU - Kim, Sunghwan
PY - 2008/10
Y1 - 2008/10
N2 - A panel of Korean firms is used to test for the soft budget constraint (SBC) in bank lending before and after the 1997-1998 financial crisis. SBC is present if a firm can borrow from its bank despite being in financial distress, which we define by a low Altman's z-score. We find that prior to 1997 financially distressed firms were able to borrow while after the crisis their ability to borrow declined substantially. We also demonstrate that SBC was a significant factor in the firms' propensity to default during the crisis.
AB - A panel of Korean firms is used to test for the soft budget constraint (SBC) in bank lending before and after the 1997-1998 financial crisis. SBC is present if a firm can borrow from its bank despite being in financial distress, which we define by a low Altman's z-score. We find that prior to 1997 financially distressed firms were able to borrow while after the crisis their ability to borrow declined substantially. We also demonstrate that SBC was a significant factor in the firms' propensity to default during the crisis.
KW - Asian financial crisis
KW - Corporate governance
KW - Soft budget constraint
UR - http://www.scopus.com/inward/record.url?scp=50449103685&partnerID=8YFLogxK
U2 - 10.1016/j.jebo.2008.05.001
DO - 10.1016/j.jebo.2008.05.001
M3 - Article
AN - SCOPUS:50449103685
SN - 0167-2681
VL - 68
SP - 178
EP - 193
JO - Journal of Economic Behavior and Organization
JF - Journal of Economic Behavior and Organization
IS - 1
ER -