ABSTRACT
While Korean firms were widely regarded as the rising stars in the global business landscape in the 1990s, the Asian financial crisis severely derailed them in the years after 1997 and drove many among them into bankruptcy. The crisis initially emerged in South-East Asia, but spilled over to Korea in the fall of 1997, resulting in a bailout by the International Monetary Fund (IMF) and a severe economic recession. Korean business groups’ weaknesses, including over-indebtedness, murky corporate governance, unprofessional leadership, and slowing dynamism due to internal bureaucracy, were brutally exposed. The chaebols restructured quickly and deeply in order to survive. Peripheral business interests were divested and internal structures and processes streamlined. Furthermore, stricter corporate governance standards were introduced, following new legislation by the Korean government. As a result, the surviving business groups emerged from the crisis in a much leaner and more competitive state when compared with the pre-crisis situation.
