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Capital Structure in South Korea: A Quantile Regression Approach

Author

Listed:
  • Bassam Fattouh

    () (University of London - School of Oriental and African Studies (SOAS)
    University of London - Centre for Financial & Management Studies (CeFIMS))

  • Laurence Harris

    (University of London - Centre for Financial and Management Studies)

  • Pasquale Scaramozzino

    () (University of Rome II - Faculty of Economics
    SOAS, University of London - Department of Financial and Management Studies)

Abstract

Knowledge of how South Korean firms choose their capital structures has particular value due to the country's specific corporate structure and the role of leverage in the evolution of its financial crisis of 1997. Using a large panel for the years 1992-2001 we investigate the evolution and determinants of South Korean firms' capital structure and focus on the differences between firms in different quantiles of the debt-capital distribution. Although regression estimates find that standard variables for asymmetric information costs explain South Korean firms' debt-capital ratios, conventional techniques using conditional means of the variables do not take full account of the heterogeneity of the sample of firms. Conditional quantile regressions show that while variables associated with standard models are significant throughout the distribution, there are considerable differences, including differences in sign, in their impact on firms with different levels of leverage. Those observed non-linearities in the determinants of capital structure are consistent with a model of capital structure that includes both costs resulting from asymmetric information and an upper bound on the debt-capital ratio.

Suggested Citation

  • Bassam Fattouh & Laurence Harris & Pasquale Scaramozzino, 2003. "Capital Structure in South Korea: A Quantile Regression Approach," CEIS Research Paper 40, Tor Vergata University, CEIS.
  • Handle: RePEc:rtv:ceisrp:40
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Capital structure; Quantile regression; South Korea JEL Classifications: G32; O53;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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