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Korea’s economic crisis

Excessive gearing and a reluctance to issue equity were partly to blame for Korea’s economic crisis, a leading academic economist told the ICAEW conference.

Peter Oppenheimer, a fellow of Christ Church, Oxford, said that Korean conglomerates – the “chaebol” – didn’t want to issue equity and dilute the owners’ share stake. Instead, they became “fantastically overgeared”.

The reason, he said, was “absolutely clear. They, rather amusingly, didn’t want to give up control” of their companies. “They wanted to go on running their companies even though they are asset-based conglomerates.”

He told the FDs: “None of you would have allowed a sensibly managed company in this country to get near that level of gearing.”

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