Heterogeneous corporate borrowing behaviours during the COVID-19 pandemic: evidence from Korea

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Abstract

This study investigates the loan financing behaviours of Korean firms during the COVID-19 pandemic. I find that financially unhealthy firms and firms with insufficient collateral capacity borrowed less during the pandemic, suggesting that lenders consider credit risk in their lending decisions. Meanwhile, the results provide evidence of credit misallocation. Particularly, zombie firms were able to increase their borrowings and firms increased their borrowings irrespective of their profitability and uncertainty. These results suggest that, without careful monitoring, lenders will suffer loan loss problems to the extent that they misallocated bank credit.

Original languageEnglish
Pages (from-to)484-488
Number of pages5
JournalApplied Economics Letters
Volume31
Issue number5
DOIs
StatePublished - 2024

Keywords

  • bank credit
  • Corporate borrowing
  • COVID-19 pandemic
  • loan financing
  • zombie firms

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