Working Paper: NBER ID: w17756
Authors: Yun Jung Kim; Linda Tesar; Jing Zhang
Abstract: Using Korean firm-level data on publicly-listed and privately-held firms together with firm exit data, we find strong evidence of the balance-sheet effect for small firms at both the intensive and extensive margins. During the crisis, small firms with more short-term foreign debt are more likely to go bankrupt, and experience larger sales declines conditional on survival. The extensive margin accounts for a large fraction of small firms' adjustment during the crisis. Consistent with many studies in the literature, large firms with larger exposure to foreign debt paradoxically have better performance during the crisis at both the intensive and extensive margin.
Keywords: foreign liabilities; small firms; Korean crisis; balance-sheet effect; firm exit
JEL Codes: E44; F32; F34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| short-term foreign debt ratio (F34) | sales growth (O49) |
| firm size (L25) | exit probabilities (C62) |
| export status (F10) | sales growth (O49) |
| foreign debt ratio (F34) | exit probabilities (C62) |