한국의 기업퇴출제도

Corporate Bankruptcy Systems in Korea

Corporate bankruptcy is a process of efficient resource allocation in an economy. There are various corporate bankruptcy processes, in court and out of court, in Korea. However, the current corporate bankruptcy systems in Korea have pitfalls that could aggravate the inefficiency of resource allocation. To improve those systems, it is necessary to present theoretical background and, upon this, to clarify the relationships among the various systems. In this study, we clarified the relationship between the corporate bankruptcy systems as well as the problems of each corporate bankruptcy process. The current corporate reorganization process has an ambiguous economic criterion and furthermore puts too small weight on this criterion in filtering out economically inefficient firms, which affects the efficiency of the workout program The corporate reorganization process and the workout program are closely related with each other. As long as the expected payoff in the corporate reorganization process is less than or equal to that in the workout program, the financial institutions will not abandon the financially or economically distressed firms in the workout program. Thus the economic criterion in the corporate reorganization process becomes essentially the criterion in the workout program. This relationship between two systems reinforces the importance of economic criterion in the corporate reorganization process. This study presents some evidence that those two systems do not work in an efficient way. More clear and concrete economic criterion should be introduced in the corporate reorgarnization process. An example of economic criterion based upon Forward Looking Criteria adopted by financial institutions is proposed. This criterion will reflect the reservation value of creditors (usually the financial institutions) in debt renegotiation. Currently, the court can change the priority of credits in the processes of corporate bankruptcy and reorganization under some conditions. Since the change of priority of credits (especially establishing security credits) will affect the social economic efficiency through the reallocation of creditors' expected payoffs, the range of court's discretion to change the priority of credits should be further restricted. The current workout program has critical drawbacks. FIrst, there is no legal obligation for both debt-firms and creditorbanks to implement the workout plan agreed on by themselves. Second, the majority shareholder of the major banks in Korea is government, hence those banks are essentially under the government control. Therefore, the autonomous operation of workout program is hard to be realized. To remedy these drawbacks, the introduction of prepackaged corporate reorganization process and the privatization of major banks at least in management are needed.