Financial Structure of South Korea\u27s Chaebol: A Flow-of-Funds Approach

The chaebol, a South Korean form of business conglomerate, has been a key factor in the country\u27s economic growth. In this study, the chaebol sector is added to the asset-liability matrix derived from a flow-of-funds (FOF) analysis in order to explain the role of the chaebol in the Korean financial system. We find that the power-of-dispersion indices in the asset-oriented system differ between the chaebol and other private corporations. Between 1987 and 2002, the former has increased while the latter has declined. In the case of the chaebol, excess liabilities were reduced, while investments in financial assets were increased. This tendency led to an increase in the power-of-dispersion index in this asset-oriented system. Our previous research found a decrease in this index for the private sector in Korea. However, the index increased for chaebol when the private sector is divided into the chaebol and small/medium-sized corporations in this paper. These results point to a greater concentration of economic power in the chaebol in the Korean financial market

Korean Flow-of-Funds and Policy Evaluation: Comparison between Monetary Stabilization Bonds and Korean Treasury Bonds

This study evaluates the authorities\u27 monetary policies on a "from-whom-to-whom" basis for Korean FOF tables and using the input–output analysis method. In order to compare the monetary policy of the central bank with that of the government, net induced investments (NII) are calculated and decomposed. The notable findings of this study are as follows. After the Asian financial crisis in 1997, negative investments by the financial sectors, induced by the central bank, increased drastically. The sign of total NII finally turned negative during the period of credit card distress. However, the global financial crisis in 2008 was a turning point, in which the NII of the financial sectors, and especially banks, switched to being positive. In contrast, net investments induced by the Korean government have shown a steady increase. In addition, other than in 2008, the effects of changes in the government portfolio have been positive and constant. In addition, the NII of a combination of financial instruments are used to analyze monetary or fiscal policy simulations. This method will provide useful indicators for policy authorities when needing to select optimal amounts and types of financial instruments for open-market operations

Inter-industry analysis and monetary policy evaluations in the Korean flow of funds accounts

This study mainly aims to provide an inter-industry analysis through the subdivision of various industries in flow of funds (FOF) accounts. Combined with the Financial Statement Analysis data from 2004 and 2005, the Korean FOF accounts are reconstructed to form "from-whom-to-whom" basis FOF tables, which are composed of 115 institutional sectors and correspond to tables and techniques of input–output (I–O) analysis. First, power of dispersion indices are obtained by applying the I–O analysis method. Most service and IT industries, construction, and light industries in manufacturing are included in the first quadrant group, whereas heavy and chemical industries are placed in the fourth quadrant since their power indices in the asset-oriented system are comparatively smaller than those of other institutional sectors. Second, investments and savings, which are induced by the central bank, are calculated for monetary policy evaluations. Industries are bifurcated into two groups to compare their features. The first group refers to industries whose power of dispersion in the asset-oriented system is greater than 1, whereas the second group indicates that their index is less than 1. We found that the net induced investments (NII)–total liabilities ratios of the first group show levels half those of the second group since the former\u27s induced savings are obviously greater than the latter