The Growth of South Korean Multinational Corporations as a Cause and Effect of the 1997 Financial Crisis

Abstract

The bankruptcy of at least nine chaebols between 1990 and 1997, of which many were South Korean MNCs, may have been one of the underlying causes of the financial and currency crisis that adversely affected South Korea in 1997, or at least contributed to increasing the vulnerability of the South Korean economy to such crisis. The crisis in turn adversely affected the growth of South Korean FDI by curtailing the financial capacity of South Korean MNCs to fund overseas investment expansion. However, the inherent financial weakness of South Korean MNCs has not prevented their continuing growth and expansion throughout the course of their history, so much as the real factors related to the growth of firms and their industries. Fundamental changes in both the real and financial sectors of the economy are required to reduce the vulnerability of South Korea to financial and currency crisis in the future, and to ensure the long-term growth and development of the South Korean economy, their firms and MNCs.