The Performance of Domestic and Foreign Banks: The Case of Korea and the Asian Financial Crisis
This paper considers the performance of banks, domestic and foreign, in Korea prior to, during, and immediately after the Asian financial crisis, examining how the profitability of those banks differed and identifying factors that explain why those differences existed. The performance of Korean banks deteriorated dramatically in 1998 with most banks recovering somewhat in 1999. Foreign banks did not experience the same negative effect on their returns on assets and equity as a rule. Several standard findings emerge. For example, equity to assets correlates positively with domestic, but not foreign, bank performance, as measured by the returns on assets and equity, even when the government recapitalized institutions that were performing quite badly. Also, foreign-currency deposits significantly and negatively correlate with domestic Korean bank performance, although only in the post-crisis period for regional banks. In sum, the domestic Korean banks suffered more severely from the Asian financial crisis than foreign banks.
|Date of creation:||May 2002|
|Date of revision:|
|Publication status:||Forthcoming in Global Economic Review|
|Contact details of provider:|| Postal: University of Connecticut 365 Fairfield Way, Unit 1063 Storrs, CT 06269-1063|
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Takatoshi Ito & Anne O. Krueger, 2001. "Regional and Global Capital Flows: Macroeconomic Causes and Consequences, NBER-EASE Volume 10," NBER Books, National Bureau of Economic Research, Inc, number ito_01-1, 07.
- Daniel E. Nolle & Rama Seth, 1996. "Do banks follow their customers abroad?," Research Paper 9620, Federal Reserve Bank of New York.
- Reinhart, Carmen & Kaminsky, Graciela, 2001.
"Bank Lending and Contagion: Evidence from the Asian Crisis,"
7580, University Library of Munich, Germany.
- Graciela L. Kaminsky & Carmen M. Reinhart, 2001. "Bank Lending and Contagion: Evidence from the Asian Crisis," NBER Chapters, in: Regional and Global Capital Flows: Macroeconomic Causes and Consequences, NBER-EASE Volume 10, pages 73-99 National Bureau of Economic Research, Inc.
- Gilbert, R. Alton & Wilson, Paul W., 1998. "Effects of Deregulation on the Productivity of Korean Banks," Journal of Economics and Business, Elsevier, vol. 50(2), pages 133-155, March.
- Aaron Tornell, 2001. "Lending Booms and Currency Crises: Empirical Link," NBER Chapters, in: Regional and Global Capital Flows: Macroeconomic Causes and Consequences, NBER-EASE Volume 10, pages 47-67 National Bureau of Economic Research, Inc.
- Joon-Ho Hahm & Frederic S. Mishkin, 2000. "Causes of the Korean Financial Crisis: Lessons for Policy," NBER Working Papers 7483, National Bureau of Economic Research, Inc.
- Claessens, Stijn & Demirguc-Kunt, Asl[iota] & Huizinga, Harry, 2001. "How does foreign entry affect domestic banking markets?," Journal of Banking & Finance, Elsevier, vol. 25(5), pages 891-911, May.
- Westbrook, M Daniel & Tybout, James R, 1993. "Estimating Returns to Scale with Large, Imperfect Panels: An Application to Chilean Manufacturing Industries," World Bank Economic Review, World Bank Group, vol. 7(1), pages 85-112, January.
- Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc.
- B. Gerard Dages & Linda S. Goldberg & Daniel Kinney, 2000.
"Foreign and domestic bank participation in emerging markets: lessons from Mexico and Argentina,"
Economic Policy Review,
Federal Reserve Bank of New York, issue Sep, pages 17-36.
- Linda Goldberg & B. Gerard Dages & Daniel Kinney, 2000. "Foreign and Domestic Bank Participation in Emerging Markets: Lessons from Mexico and Argentina," NBER Working Papers 7714, National Bureau of Economic Research, Inc.
- Marcus Noland, 2000. "Avoiding the Apocalypse: The Future of the Two Koreas," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 94, January.
- Yongil Jeon & Stephen Miller, 2004.
"The effect of the Asian financial crisis on the performance of Korean nationwide banks,"
Applied Financial Economics,
Taylor & Francis Journals, vol. 14(5), pages 351-360.
- Yongil Jeon & Stephen M. Miller, 2002. "The Effect of the Asian Financial Crisis on the Performance of Korean Nationwide Banks," Working papers 2002-32, University of Connecticut, Department of Economics.
- Miller, Merton, 1998. "Asian financial crisis," Japan and the World Economy, Elsevier, vol. 10(3), pages 355-358, July.
- Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 2001. "Fundamental Determinants of the Asian Crisis: The Role of Financial Fragility and External Imbalances," NBER Chapters, in: Regional and Global Capital Flows: Macroeconomic Causes and Consequences, NBER-EASE Volume 10, pages 11-41 National Bureau of Economic Research, Inc.
- Dongchul Cho & Kiseok Hong, 2001. "Currency Crisis of Korea: Internal Weakness or External Interdependence?," NBER Chapters, in: Regional and Global Capital Flows: Macroeconomic Causes and Consequences, NBER-EASE Volume 10, pages 337-373 National Bureau of Economic Research, Inc.
- DeYoung, Robert & Nolle, Daniel E, 1996. "Foreign-Owned Banks in the United States: Earning Market Share or Buying It?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(4), pages 622-36, November.
When requesting a correction, please mention this item's handle: RePEc:uct:uconnp:2002-28. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark McConnel)
If references are entirely missing, you can add them using this form.