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Empirical Evalution of Corporate Restructuring

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  • 저자 강동수(姜東秀) , Stijn Claessens, 김준경(金俊經) , 최용석(崔容碩) , 조준모, 이준엽, Chunlin Zhang, Peng Xu, Naoyuki Yoshino
  • 발행일 2003/12/31
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요약 * This content is same as a chapter 10 Conclusion.

There are two sets of conclusions: one set deriving from the Korea, Japan and China country studies specifically; and one set deriving from the comparisons between the countries.

On all studies, it is clear that corporate restructuring is a complex affair, even in normal times. This is both in terms of "outputs" and "inputs" to the restructuring phenomenon. There are many dimensions to the outputs or measures of corporate restructuring: changes in management, forms of asset disposition, degree of mergers and acquisitions, and associated improvements in performance, profitability, productivity, etc. Much of this corporate restructuring is a continuous process and as such restructuring ought to be the norm at any time in any economy, rather than the exception. Restructuring it is thus not linked to a financial crisis as occurred in many East Asian countries only. As such, it is unlikely one can expect to find a single measure that can capture the restructuring process well as it is difficult to assess the vitality of any corporate sector.

In terms of "inputs," it also clear restructuring is affected by many factors. The state of the world economy and domestic macroeconomic performance and policies are key restructuring inputs. The institutional framework for corporate sector restructuring, including bankruptcy and reorganization regime, the tax and provisioning rules for distressed assets valuation and restructuring, etc. are essential. Similarly, the state of the banking system and its regulation and supervision can help explain corporate restructuring and the efficacy of restructuring. Important complicating factor in analyzing the effects of these measures and institutional environment is that there is much heterogeneity in performance among firms in any market economy, even when not in a situation of large-scale financial distress. Many studies have found, for example, that firms exit and enter without any obvious explanations. In summary, the mapping from inputs to outputs is thus not easy in any market economies, or in a economy in large-scale financial distress.

In terms of systemic restructuring, some lessons on determinants have nevertheless become clear, and have been confirmed in the studies here. There is a need to limit the government's role to establishing the enabling environment (insolvency, tax, accounting etc) for the private sector to do the necessary restructuring. It has also become clear that it is important to adjust the approach by the type of assets, which are causing the distress. Real estate problems require different solution than private corporations, which in turn require different approaches from state-owned enterprises. To the extent that the government directly intervenes in systemic restructurings, it should be careful on how it deals with "losers". It should not close banks without alternative financial intermediation mechanisms and a comprehensive program of bank restructuring. It ought not recapitalize too quickly banks and should try, where possible, to link recapitalization with bank privatization. Instead of focusing on losers, the government should try to support winners by providing tax relief or other support to healthy corporations, and help small and medium sized firms that are often the victim of the credit crunch following the financial crisis.

A key lesson is that to resolve the debt overhang that drags down the recovery from a systemic financial crisis, one needs to have loss-absorption mechanisms. In many cases, this will require the injection of public funds. In many cases of systemic distress, the government's role may involve providing resources for resolving corporate sector distress, either directly by assuming non-performing assets through asset management corporations or indirectly by recapitalization of financial institutions. It will then be important to design the proper incentive structures for these mechanisms. If, for example, recapitalization is necessary to restore the banking system, it will be important to link the recapitalization of an individual bank with the degree of progress the bank makes in restructuring its non-performing loans. Since one should not expect banks to do deep corporate restructuring, it will also be important to invite early on other investors and give them the loss-absorption mechanisms. This will often imply mixed public-private restructuring funds, where private (sometimes foreign) management runs a government-owned distress fund.

Many of these lessons are not limited to systemic crises and apply also those during normal times. These lessons are also reflected in the papers in this volume. While each paper identifies an important aspect and determinant of corporate restructuring, it is also the case that none of the analyses can claim to have found any single explanatory factor for restructuring. This was made especially clear in the discussions of the papers during the conference that highlighted the complex nature of corporate restructuring. In the empirical applications, this means the lessons from the analyses have to remain somewhat incomplete given endogeneity, simultaneity of many relationships, and omitted variable problems. This does not reduce the value of any of the analyses, but can leave the policy makers with the task to balance the intensity of various reforms according to their own insights.

In terms of the second set of lessons, the cross-country comparisons, the main difference in the papers in the conference was in the degree to which the restructuring process can be empirically analyzed given the quality and availability of data. Korea stands out with a wide range of data and large coverage. Surprisingly perhaps, Japan is not that well provided for in terms of corporate sector data. And in China, data coverage is limited to the firms listed on the stock exchanges, some firm survey data, or more aggregate data. This means that the empirical analyses for Japan and China are much more limited and less insightful. And it makes cross-country comparisons even more difficult given the lack of similar coverage.

The lessons also vary, as there are great differences in the nature of the corporate sector difficulties and the needs for restructuring. In Japan, the issues are of long-standing, structural nature, involving among others a revisiting of the relationship between the banking and corporate sectors. Furthermore, there are some specific difficulties with regards to construction companies and political economy issues. In China, the issue is the transition to a market economy and consequent the reform and privatization of many state-owned enterprises. Each situation in the respective countries has its own unique features and challenges. Yet, there are many similarities in the reform processes.

In all countries the private sector has been given the main task for restructuring of corporations. The governments have taken supportive measures in the form of reforms to the bankruptcy regime, banking system recapitalization and restructuring, accounting and tax changes, improvements in competition policy, etc. Although the intensity and depth of reform vary, these reforms seem to be bearing fruit in all countries studied. As such, the main cross-country lesson may be that there is little substitute between building the institutional foundations of any market economy and providing the right environment for corporate sector restructuring.
저자

Chunlin Zhang

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