Corporate Financing Choices in South Korea: Trends in the Aggregate Financials in Regards to the Pecking Order Theory

Corporate Financing Choices in South Korea: Trends in the Aggregate Financials in Regards to the Pecking Order Theory

Corporate financing patterns can be observed either from firm-level data or aggregate financial data. Although many prior studies use firm-level data, aggregate data also has its own benefits: It shows how the trend of aggregate corporate financing choices in the economy has evolved over time. This paper looks at the aggregate corporate financing patterns over time in South Korea, particularly focusing on changes around crises. Specifically, the paper attempts to reflect the trends in the aggregate financials in South Korea upon the pecking-order theory of corporate financing decisions. In particular, this paper finds that debt issuance exhibits tendency of growing upon economic and financial crises. In addition, there is a clear pattern that net debt issuance follows financing deficit in the aggregate financials. These results in general support the implication of the pecking-order theory of corporate financing decisions.

Corporate financing patterns can be observed either from firm-level data or aggregate financial data. Although many prior studies use firm-level data, aggregate data also has its own benefits: It shows how the trend of aggregate corporate financing choices in the economy has evolved over time. This paper looks at the aggregate corporate financing patterns over time in South Korea, particularly focusing on changes around crises. Specifically, the paper attempts to reflect the trends in the aggregate financials in South Korea upon the pecking-order theory of corporate financing decisions. In particular, this paper finds that debt issuance exhibits tendency of growing upon economic and financial crises. In addition, there is a clear pattern that net debt issuance follows financing deficit in the aggregate financials. These results in general support the implication of the pecking-order theory of corporate financing decisions.