Korea's Economy
From the Issue
Korea's Economy Volume 22About Korea's Economy
Korea’s Economy is KEI’s annual journal publication dedicated to the key issues of the day for the Korean economy. Articles in Korea’s Economy are designed to give the casual, but informed reader insight into issues related to Korea’s markets and financial institutions, economic reform, economic relations with the wider world, and North Korea. It is published jointly each year with the Korea Institute for International Economic Policy.
In the unfolding process of the Korean financial crisis in 1997, an inefficient corporate bankruptcy system played a damaging role in the Korean economy. Before the crisis, in 1996 and during the first three quarters of 1997, numerous large firms faced with bankruptcy actively sought shelter under court-administered rehabilitation procedures. However, Korea’s poor bankruptcy system failed to maintain the most advantageous order among the increasingly large number of financially distressed firms as they were targeted to undergo the rehabilitation procedure. Uncertainty and delay in dealing with failing firms added to the distortion in the economy’s resource allocation process before the crisis broke out.