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The Value-Added and the Productivity of Korean Banking Industry (in Korean)

Author

Listed:
  • Se-Jik Kim

    (Department of Economics, Seoul National University)

  • Seungki Hong

    (Department of Economics, Columbia University)

Abstract

This paper aims to evaluate the core ability of Korean banks to distinguish more productive firms from less productive ones and provide loans selectively to the former. To this end, we calculate the value-added of Korean banks from the distribution side, and then assess total factor productivity (TFP) of the banks using the financial statement data for the period 1991-2013. We find that the productivity of the Korean baking sector has not far grown from the level of the early 1990s. The banking sector productivity, which plummeted during the 1997 Korean financial crisis, rebounded in the mid-2000s but retreated again to its level of 1991 in recent years. We also discover that major declines in the Korean banking sector productivity can be largely attributed to tremendous losses from huge bad loans. These findings suggest that Korean banks may not have fully developed their capacity to select high-productivity firms and reduce bad loans for the last two decades.

Suggested Citation

  • Se-Jik Kim & Seungki Hong, 2015. "The Value-Added and the Productivity of Korean Banking Industry (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 21(3), pages 35-74, September.
    • Handle: RePEc:bok:journl:v:21:y:2015:i:3:p:35-74
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    More about this item

    Keywords

    Banking sector; Bad loans; Distribution-side value-added; Total factor productivity;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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