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The Impact of Foreign Liabilities on Small Firms: Firm-Level Evidence from the Korean Crisis

Author

Listed:
  • Yun Jung Kim

    (University of Michigan)

  • Linda L. Tesar

    (University of Michigan and NBER)

  • Jing Zhang

    (University of Michigan)

Abstract

Using Korean firm-level data on publicly-listed and privately-held firms together with firm exit data, we find strong evidence of the balance-sheet effect for small firms at both the intensive and extensive margins. During the crisis, small firms with more short-term foreign debt are more likely to go bankrupt, and experience larger sales declines conditional on survival. The extensive margin accounts for a large fraction of small firmsÕ adjustment during the crisis. Consistent with many studies in the literature, large firms with larger exposure to foreign debt paradoxically have better performance during the crisis at both the intensive and extensive margin.

Suggested Citation

  • Yun Jung Kim & Linda L. Tesar & Jing Zhang, 2011. "The Impact of Foreign Liabilities on Small Firms: Firm-Level Evidence from the Korean Crisis," Working Papers 620, Research Seminar in International Economics, University of Michigan.
    • Handle: RePEc:mie:wpaper:620
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    References listed on IDEAS

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    More about this item

    Keywords

    financial crisis; firm-level data; balance-sheet effects; Korean economy;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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