The IMF Working Papers series is designed to make IMF staff research available to a wide audience. With nearly 300 released each year, working papers cover a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
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.