Journal of Insurance and Finance 2021 KCI Impact Factor : 0.67

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pISSN : 2384-3209

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2018, Vol.29, No.2

  • 1.

    Determinants and Impact on Macroeconomic Performance of Non-Performing Loans Growth

    Inro Lee , LEE, Woongki | 2018, 29(2) | pp.3~37 | number of Cited : 3
    Abstract PDF
    This paper examines the determinants of non-performing loans (hereafter NPLs) in the perspective of the macroeconomic and bank-level variables. Our contributions to the literature are in three folds. First, we employ the fixed effect model controlling for bank-level heterogeneity and the dynamic panel model controlling for autocorrelation to examine the determinants of NPLs growth in the Korean banking sector. On top of that, we extend the sample to commercial banks and savings banks. Including savings bank is crucial since those banks were distressed during the sample periods. Third, this paper analyzes the feedback effects of the banking sector on the real economy using panel vector autoregressive model. The results show that, among other macroeconomic factors, ‘growth rate of GDP’, ‘growth rate of KOSPI’, ‘growth rate of HPI’, ‘inflation’, ‘risk-free rate’, ‘corporate sector leverage’, ‘government spending-to-taxes’, ‘non-financial sector credit-to-GDP’, and ‘growth of nominal exchange rate’ support the macroeconomic hypotheses. For the bank-level hypotheses, it was found that 1) ‘non-interest expenses-to-total assets’ and ‘total expenses-to-total income’ satisfy the skimping hypothesis, 2) ‘bank size in log’ satisfies the too-big-to-fail hypothesis, 3) ‘liquid assets-to-total deposits’ satisfy the liquidity hypothesis, and 4) ‘total loans-to-total assets’, ‘total loans-to-total deposits’, and ‘interest income-to-total loans’ satisfy the lending supply hypothesis. Furthermore, as for the impact of the banking sector on the real economy, a simultaneous negative relationship was found between bank's NPLs and GDP. The causal relationship between the NPLs and GDP, on the other hand, was only found in the inflation and credit channels. According to the impulse response functions estimated, shocks in the banking sector result in negative consequences of the real economy for about one year. This implies that there exists the positive macroeconomic effect if individual banks effectively manage their NPLs.
  • 2.

    Estimation of self-employed pension income using Markov conversion rates

    Sung-ho Kang , Keonshik Ryu | 2018, 29(2) | pp.39~71 | number of Cited : 0
    Abstract PDF
    This study estimates pension income replacement rate based on the estimation of the lifetime work history of self-employed using the Markov conversion rate. First, the estimation results show that the work type changes continuously during the lifetime. As a result, the total work period of workers who entered the labor market at the age of 25 was estimated to be 27.3 years (wage work period 19.5 years, self-employment period 7.8 years) and non-work period 12.7 years. In particular, the wage work period rate of self-employed(wage superior, mixed type) was estimated to be 86.0% during the lifetime, which means that self-employed also have considerable wage work period. Next, the estimation results of the pension income for pure work type(not changing during life) show that the replacement rate of pure wage earners is higher than that of the pure self-employed. On the other hand, the replacement rate for mixed work type(changing during life, but in the case of current self-employed) was higher in the order of wage superior type, self-employed superior type and non-business superior type. These pension income are generally low for self-employed pensioners compared to wage earners, but this is determined by the wage and self-employment periods and income levels established during their lifetime. Therefore, in suggesting the old-age income guarantee policy for self-employed, this paper proposes that it is necessary to consider not only the current work type but also the past work type, ie, the change of work history.
  • 3.

    Corporate Cash Holdings and the Effect of Chaebol Affiliated on the Implied Cost of Equity Capital: Evidence from Korea

    Hongmin Chun | 2018, 29(2) | pp.73~102 | number of Cited : 1
    Abstract PDF
    This paper examines firms’ cash holdings and their effect on equity capital cost, distinguishing firms that belong to chaebol and non-chaebol groups. A chaebol is a South Korean form of business conglomerate. Chaebols are typically global multinationals owning numerous international enterprises, controlled by controlling shareholders with power over all operations. So this paper needs to examine whether firms’ cash holdings and their effect on the implied cost of equity capital, distinguishing firms that belong to chaebol or not. Empirical results suggest that higher cash holdings increase risk, which holds for chaebol group of firms. Thus, a poor corporate governance system for a chaebol-affiliated firm with high cash holdings could be a possible factor contributing to the risk premium. Finally, we conduct a 2SLS regression, and our empirical results are consistent for both the full and the chaebol samples, suggesting that our ordinary least squares results are valid. So in Korea, higher cash holdings represent risk premium closely related to overinvestment and agency problems between managers and shareholders. Key Words: Cash holdings, Implied cost of equity capital, Chaebol, Agency problem.
  • 4.

    Is there the Difference of IPO Underpricing between KOSPI and KOSDAQ Market ?

    Chi-Seung Song | 2018, 29(2) | pp.103~134 | number of Cited : 5
    Abstract PDF
    This research is to investigate the difference of IPO underpricing between listing markets for IPO firms from 2000.1 to 2015.12 in KOSPI and KOSDAQ market using different methods from previous papers(for example, usage of bid distribution date that earlier studies have ignored, employing 4 cumulative excess returns from IPO price to the first date, 10, 20, 30 days after listing to avoid the distortion of measuring date on the IPO excess return, and so on.) For the purpose of the study, I employ regression model considering the fixed effect of year and industry, after controlling other variables to influence IPO underpricing. The results from the study on the difference of IPO underpricing between KOSPI and KOSDAQ market are as follows; First, IPO firms from KOSPI market have less underpricing than those from KOSDAQ market for the only period before the abolition of put-back option system. Second, this study finds that there is a significant reduction of the level of underpricing after the abolition of put-back option system, especially for KOSDAQ market. This suggests that this change of system contributes to the efficiency of Korean IPO market. Third, I find that there is the certification effect of venture capital on the mixed sample based on IPO firms listed in KOSPI or KOSDAQ market.