Publication:
Unintended Consequences of Leverage Regulation: Evidence from Korea*

Simple item page
dc.contributor.authorLee, Woo Jong
dc.contributor.authorYang, Daniel
dc.contributor.authorJung, Tae Jin
dc.contributor.authorKim, Kyung Won (Natalie)
dc.contributor.funderInternational Monetary Fund
dc.contributor.rorhttps://ror.org/02jjdwm75
dc.date.accessioned2024-07-08T13:14:13Z
dc.date.available2024-07-08T13:14:13Z
dc.date.issued2023
dc.description.abstractDuring the 1997 Asian financial crisis,Korean regulators imposed a 200% leverage cap to curb excessive debt and restore economic stability. We examine the real effects and externalities of mandated capital structure changes resulting from this leverage ratio regulation. Our findings indicate that firms that met the leverage requirement experienced a significant decrease in firm risk. However,the effect varied depending on how firms adjusted their capital structure. Firms that chose to issue equity to lower their leverage ratio,as opposed to firms repaying debt,exhibited higher firm risk,lower investment-q sensitivity,and lower profitability in the post-regulation period. © 2023 Korean Securities Association.
dc.description.fundingtypeThe Asian financial crisis of 1997 provides a unique opportunity to assess the real effects of capital structure changes. Following the crisis, the Korean Government sought financial support from the International Monetary Fund (IMF), which proposed various restructuring measures for the corporate sector, with reducing excessive debt being a primary focus. 1
dc.description.peerreviewedyes
dc.description.statusPublished
dc.formatapplication/pdf
dc.identifier.citationJung, T., Kim, N. K. W., Lee, W. J., & Yang, D. (2023). Unintended Consequences of Leverage Regulation: Evidence from Korea. Asia?Pacific Journal of Financial Studies, 52(4), 502-538. https://doi.org/10.1111/ajfs.12442
dc.identifier.doihttps://doi.org/10.1111/ajfs.12442
dc.identifier.issn20419945
dc.identifier.officialurlhttps://www.scopus.com/inward/record.uri?eid=2-s2.0-85166926569&doi=10.1111%2fajfs.12442&partnerID=40&md5=b570b4ea16d458cdcf0f460c63a5e3a4
dc.identifier.urihttps://hdl.handle.net/20.500.14417/3019
dc.issue.number4
dc.journal.titleAsia-Pacific Journal of Financial Studies
dc.language.isoen
dc.page.final538
dc.page.initial502
dc.publisherJohn Wiley and Sons Inc
dc.relation.entityIE University
dc.relation.schoolIE Business School
dc.rightsAttribution-NonCommercial 4.0 International
dc.rights.accessRightsinfo:eu-repo/semantics/openAccess
dc.rights.urihttps://creativecommons.org/licenses/by-nc/4.0/
dc.subject.keywordAsian financial crisis
dc.subject.keywordCapital structure
dc.subject.keywordG32
dc.subject.keywordG38
dc.subject.keywordRegulation
dc.subject.keywordTarget leverage
dc.titleUnintended Consequences of Leverage Regulation: Evidence from Korea*
dc.typeinfo:eu-repo/semantics/article
dc.version.typeinfo:eu-repo/semantics/publishedVersion
dc.volume.number52
dspace.entity.typePublication
person.identifier.scopus-author-id57200448877
person.identifier.scopus-author-id57194776082
person.identifier.scopus-author-id55608889600
person.identifier.scopus-author-id59040664400
relation.isAuthorOfPublication04c22ab1-9acc-4d7a-b5d7-2147b3cac689
relation.isAuthorOfPublication6a3aa3d3-f0c1-40f5-920e-a62b5661adde
relation.isAuthorOfPublication.latestForDiscovery04c22ab1-9acc-4d7a-b5d7-2147b3cac689
Files
Original bundle
Now showing 1 - 1 of 1
Thumbnail Image
Name:
Unintended Consequences of Leverage Regulation Evidence from Korea.pdf
Size:
829.4 KB
Format:
Adobe Portable Document Format
Download
Collections
Research Articles