Determinants of Credit Rationing in Korean Bank Loan Markets

This paper attempts to investigate the determinants of credit rationing experienced by firms using Korean firm data. We find that large firms, bank-independent firms, and chaebol firms are more likely to be rationed out in Korean bank loan markets. Furthermore, most firms are more likely to face severe financial constraints during a monetary contraction period. These findings suggest that a tightening of monetary policy exerts a disproportionate effect on firms’ activities, with a more contraction effect on large, bank-independent, and chaebol firms.