Do Main Banks Extract Rents from their Client Firms? Evidence from Korean Chaebol
AbstractUsing a unique data set on all industrial firms listed on Korea Stock Exchange and KOSDAQ stock market from 1991 to 2000, we find that cash ratios for chaebol firms are lower than for non-chaebol firms. Controlling for access to the bond market and financial services arms does not change this result. We do however find that there is a shift in the degree of bank power over the last decade. Consistent with the main bank monopoly hypothesis during the corporate restructuring process after the financial crisis in 1997, the interest differential charged to chaebol firms is significantly higher than the earlier period, suggesting extraction of rents against chaebol client firms by main banks.
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Bibliographic InfoPaper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2002-9.
Length: 42 p.
Date of creation: Sep 2002
Date of revision:
Note: This Version: June 2002; First Version: May 2001
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Cash holdings; bank power; rent extraction; Korean chaebol;
Other versions of this item:
- Kim, Kevin Y. & Park, Kwangwoo & Ratti, Ronald A. & Shin, Hyun-Han, 2004. "Do Main Banks Extract Rents from Their Client Firms? Evidence from Korean Chaebol," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 45(1), pages 15-45, June.
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
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