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THE CONSEQUENCES OF THE KOREAN FINANCIAL CRISIS ON POLICY, FIRMS, CORPORATE GOVERNANCE AND INSIDER TRADING

Author
Choe, Hyunkyung
Abstract
This dissertation delves into corporate behavior around the 1997 Asian crisis
which had a significant effect on Korean firms and the economy. It includes three
main parts.
Chapter 2 looks at corporate governance and firm value in Korea. Since the Asian
crisis the corporate governance issue has changed remarkably in Korea. The Korean
government has amended many provisions regarding this issue. This paper first
surveys the series of amendments to associated provisions and laws. Then we
investigate the relationship between corporate governance and firm value using the
long-term event study method to see how these amendments affect firm value.
Chapter 3 examines the structural changes of seventy firms in the Korean Stock
Exchange around the Asian crisis under the assumption that break dates are unknown.
The Korean economy was broken up by the crisis in 1997 and then it took some years
for it to be recovered through the effort of the government and firms. Thus, it is
natural to think that firms? specific parameters might have been changed reflecting
firms? efforts to survive the crisis. This paper assumes that the structural break dates
are unknown. Then we estimate them and test for structural change of unknown timing
around the crisis on each of seventy firms in the KSE.
Chapter 4 is an empirical investigation of insider trading. The Korean economy
had a hard time during the Asian crisis. To restructure and reform the economy the
Korean government implemented IMF guidelines which it agreed to follow when
receiving IMF?s $57 billion rescue bailout package. In this chapter we evaluate the
iv
restructuring and reform in the past decade in terms of the cleanliness of the stock
market in terms of insider trading. Considering the provisions regarding insider
trading in Korea, it is hard to quantify the degree of insider trading using only reported
insider trading data. Thus, this paper adopts the event study method to analyze the
degree of insider trading before and after the reforms. We find that there is evidence
suggesting that there was insider trading before the crisis reforms which was
subsequently (or eliminated) following these reforms.
Date Issued
2008-07-30Subject
insider trading; corporate governance; Korea; Asian crisis
Type
dissertation or thesis