Credit Market Frictions and Bankruptcy Law Design—Implications for Korea*

Bankruptcy law design has important implications for financial markets and economic growth. As bankruptcy law design interacts with local economic and political conditions, it is important to consider these factors when designing optimal bankruptcy law. This paper first describes major credit market frictions and how they interact with bankruptcy law design. After introducing important aspects of the Korean bankruptcy system, the paper discusses how economic, political, and cultural factors in Korea interact with bankruptcy law design. Based on this analysis, the paper derives implications for optimal bankruptcy design in Korea.