Mass redemptions would send the market into free fall. Foreigners may also reconsider alliances with Korean companies, just when Korean firms need foreign innovation to compete in the New Economy. Smaller chaebols need better management too. In fact it may be key to their avoiding bankruptcy in a liquidity crunch that analysts say will likely strike late this year. Most Korean companies are short of cash, rising oil prices are squeezing profit margins and their depressed share prices make it more difficult for them to raise capital than rivals in Taiwan or Hong Kong.
Many banks are too worried about their own survival to lend much money.
Crucially, companies will face further pressure at year's end when corporate bonds issued in the teeth of the 1997 crisis come due. Those without good corporate-governance structures, or at least the promise of such, will be less likely to receive rollovers on loans. He believes it may take more bankruptcies to trigger the huge effort still needed to overhaul corporate governance. The long-term health of the stockmarket hinges on the big chaebols' willingness to embrace transparent management. American investors at Samsung Electronics' global road show got few answers when they asked why the company spent 100 billion won to purchase 2 million shares in Samsung Electro-Mechanics, or Semco, a deal that didn't seem to benefit shareholders.