The Personalist Ethic and the Rise of Urban Korea by Yunshik Chang

Author:Yunshik Chang [Chang, Yunshik]
Language: eng
Format: epub
Tags: Ethnic Studies, American, Asian American Studies, Social Science, Political Science, World, Sociology, Asian, Regional Studies, General
ISBN: 9781351598804
Google: etZCDwAAQBAJ
Goodreads: 37571010
Publisher: Routledge
Published: 2017-12-12T00:00:00+00:00

Private Loans (sach’ae) – It is widely known that both large and small business firms often use informal private loans. Yet little is known about the extent to which this competes with banks and other financial organizations. That private loans played a significant role in corporate finance, however, became evident in 1972 when the Federation of Korean Industries chair appealed directly to President Park in a desperate effort to save many private firms from going into bankruptcy because of their inability to pay back private loans. Facing an historical crisis of Korean enterprise, Park’s government accordingly took the extreme measure of freezing private loans under a presidential emergency decree. This measure came to be known as the P’alsam choch’I (August the Third Settlement). Private firms reported 40,677 private loans, which had a total value of 34.6 billion won, equivalent to 34 percent of currency in circulation (Kim Chŏngnyŏm 1990: 275). The Korean financial market has changed considerably since then but there is no evidence that the private loan market has disappeared.

The Stock Market– The P’alsam choch’i was soon followed by the enactment of the law (January 5, 1973) expediting the opening of enterprise to the public The aim of this law was twofold: (1) to reform the corporate financial structure by inducing corporations to switch from financing through bank and/or informal private loans to stock issuing and (2) to help promote healthy development of the national economy through public participation in corporate enterprises. By opening the stock market to the public, the government expected to (1) help corporate firms reduce their financial deficits by issuing company bonds and stocks, (2) separate capital from management and leave management to professional managers, thereby advancing socialization of corporate enterprises and (3) help redistribute income, thereby promoting social stability. Opening stock to the public, the government argued, “is to compensate those middle class – not professional – informal private lenders for their sacrifice incurred in saving the large corporate firms” (Kim Chŏngnyŏm 1990: 275). In an effort to expedite public participation, the government selected those firms thought to be in need of assistance and offered them various benefits, including reduction of corporate and income tax, reassessment of corporate assets and the like. Firms that refused to accept government advice suffered numerous disadvantages, such as a 20 percent corporate tax increase, increase of the tax on stockholder dividends, withdrawal of business loss allowance and reductions of the extent of tax exemption for donation or public relation expenses. More importantly, the Minister of Finance was authorized to request banking organizations to restrict loans to them.

Though they were grateful for what the country did to save them from bankruptcy, corporate response to stock opening was lukewarm. With the P’alsam choch’i, their financial burden was considerably lessened. The lowering of the interest rate of bank and informal private loans also reduced production costs and thus increased corporate income. Incensed by the slow response, Park issued a warning to corporate owners and made clear his resolution to push the

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.