Corporate Restructuring and Its Macro Effects
IMF Working Papers, January 27, 2017
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- Corporate Restructuring and Its Macro Effects
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Bibliographic details
- Authors: Jongsoon Shin
- Published: January 27, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475572438.001
Summary
- Paper describes issues in Korea’s corporate sector, the need for restructuring, and the authorities’ initiatives and challenges.
- Identifies lessons from other countries’ experience.
- Conducts an econometric analysis based on cross-country aggregate data, compared with previous studies which mostly use firm-level data.
- Main analytical finding: restructuring episodes, while sometimes challenging in the short term, have typically been associated with more rapid economic growth afterward.
- Short-term effects: corporate restructuring could have a negative effect on the labor and the financial markets.
- Medium-term effects: associated with positive growth through increased investment and capital productivity, outpacing the negative effects.
Key Findings and Evidence
- Restructuring episodes are typically followed by more rapid economic growth.
- Negative short-term impacts are observed on:
- Labor markets.
- Financial markets.
- Positive medium-term impacts operate through:
- Increased investment.
- Increased capital productivity.
- The paper’s econometric analysis uses cross-country aggregate data and is compared with prior firm-level studies.
Policy Implications and Challenges
- Authorities’ initiatives and challenges in Korea’s corporate sector are described (specific initiatives and challenges are discussed in the paper).
- Policy focus areas implied by the analysis:
- Managing short-term labor-market disruptions from restructuring.
- Managing short-term financial-market disruptions from restructuring.
- Promoting investment and measures that enhance capital productivity to realize medium-term growth benefits.
- Lessons from other countries’ experiences are identified to inform policy design and implementation.
Methodology and Scope
- Empirical approach: econometric analysis based on cross-country aggregate data.
- Comparative perspective: results compared with previous studies that mostly use firm-level data.
- Country focus: Korea’s corporate sector is the central case for diagnostics and policy discussion.
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- Corporate Restructuring and Its Macro Effects