The Nexus between Financial Status of Credit Card Business and Macro Economic Factors: Evidence from Korean Credit Card Firms

The study examines the nexus between financial status of credit card firms and economic factors in terms of ups and downs of credit card business based on revenues, financial soundness, capital adequacy, and asset size. Using panel data with in-sample and out-of-sample scope, this study finds out the following significant evidence. First, credit card revenue is mostly influenced by the level of credit crunch, the trend of consumption, unemployment condition, and the degree of pressure for inflation. Second, revenues on affiliation fee, card loan, and installment fee are significantly affected by the level of market interest rate. Third, the economic condition with the increase of disposable income under low-level of unemployment results in improving financial soundness in credit card business. Fourth, increasing unemployment condition results in credit card firms making the equity ratio raised by reducing risk-weighted asset. Fifth, asset size is related with economic variables like market interest rate, default rate, disposable income, unemployment, and the pressure for inflation. Unlike other relationships among asset size and economic variables, the nexus between size and disposable income is only positive.