Dongsoo Kang

OVERVIEW: EMPIRICAL EVALUATION OF CORPORATE RESTRUCTURING IN NORTHEAST ASIA

The 1997 East Asian financial crisis disclosed that a period of miraculous economic growth and excellent corporate sector performance could be accompanied by many deep and structural problems. A combination of external shocks and internal systematic weaknesses led to large-scale corporate distress and drove the economies of many East Asian countries into near paralysis. Dwindling corporate profitability, imprudent financial supervision, poor corporate governance, inflexible labor markets, inefficient public services, and weak macroeconomic policies have been among the key factors often named as the underlying causes of the East Asian financial crisis. It has become clear that no single factor alone can explain the financial crisis. As the causes of the financial crisis were multi-faceted, it also has become clear that the resolution of the crisis has required multi-dimensional endeavors. Aiming at a sustainable economy, various restructuring and reform efforts have been put forth and executed. Restructuring in corporate sector has been among the focal points of these efforts, for the crisis stemmed directly from the sector and economic viability could not be achieved without the revitalization of ailing firms. Yet, the outcome and efficiency of these restructuring efforts is not yet well known. On November 12, 2003, the Korea Development Institute (KDI) convened a conference entitled “Empirical Evaluation of Corporate Restructuring in Northeast Asia.” This was not the first attempt to evaluate the restructuring experiences in East Asian countries and draw lessons for not only economists but also policy makers. Indeed, a host of conferences, seminars and workshops have been held around the world since the East Asian financial crisis so as to disseminate knowledge on effective and efficient corporate restructuring strategies and measures. The focus of this event was, however, different from other pervious conventions as it focused exclusively on empirically assessing the progress in corporate sector and the lessons from such analysis for corporate sector restructuring. The conference and the papers collected in this volume cover a variety of issues on corporate restructuring from the fundamental causes of corporate distress to the specific evaluations on the restructuring tools. Specific questions are as follows: What were the origins of corporate distress in this region? What instruments among the various restructuring measures have been the most effective in terms of improving the performance of corporations and resolving financial distress? How effective have