Soft Related Lending: A Tale of Two Korean Banks
AbstractIn this paper, we present indirect evidence that the IMF’s insistence on foreign control of two large nationwide Korean banks in exchange for short-term support during the 1997 financial crisis helped restrain soft related lending practices. News signaling the likely sale of a bank to a foreign financial institution yields an average daily decrease of about 2% in the stock price of related borrowers. News indicating difficulty in finding an interested foreign investor generates an increase in the stock price of related borrowers of about the same magnitude. These signals have larger impacts on less-profitable, less-liquid, and more bank-dependent firms.
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Bibliographic InfoPaper provided by Wesleyan University, Department of Economics in its series Wesleyan Economics Working Papers with number 2005-011.
Length: 34 pages
Date of creation: Dec 2005
Date of revision:
Publication status: Forthcoming in the Journal of Banking and Finance
Related Lending; Korean Banks; Privatization; Globalization;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-12-04 (All new papers)
- NEP-BAN-2006-12-04 (Banking)
- NEP-SEA-2006-12-04 (South East Asia)
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