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Bankruptcy Policy Reforms and Corporate Restructuring in Postcrisis Korea
Author: Lim Youngjae
Region: Asia
Location: Korea, South
Published May 25, 2011
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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.

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