The structure of conglomerates embedded in the strong vertical ownership network in East Asia was believed to be a driving force for the economic success but was also blamed for the recent financial crisis in Asia given the fallacy - too big to collapse. This paper introduces a notion of collective relationship banking (CRB) as a mechanism for monitoring private information and investigates the likelihood of such a banking relationship when the borrowing firms have heterogenous vertical ownership structure using a Korean firm level panel dataset. Policy concerns are then addressed since the post-crisis corporate restructuring may create a more concentrated banking relationship with a few dominant banks.
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Paper provided by Centre for Competition Policy, University of East Anglia in its series Working Papers with number
06-2.