This paper describes issues in Korea's corporate sector, the need for restructuring, and the
authorities' initiatives and challenges. It then identifies lessons from other countries'
experience and conducts an econometric analysis based on cross-country aggregate data,
compared with previous studies which mostly use firm-level data. This analysis finds that
restructuring episodes, while sometimes challenging in the short term, have typically been
associated with more rapid economic growth afterward. Corporate restructuring could have a
negative effect on the labor and the financial markets in the short term, but is associated with
positive growth through increased investment and capital productivity in the medium term,
outpacing the negative effects.