Govenrment and Business Environment Case Study

Bailout of LG Card Company

OR

Abstract:
Since 1999, South Korea had been encouraging the usage of credit cards in order to improve tax collections and also to achieve a rapid economic growth. LG Card Company took advantage of the favourable environment and pursued aggressive marketing and financing policies. However, financial leverage turned out to be a double-edged sword – good in good times and very bad in bad times. Rising credit card delinquencies coupled with a slowdown in economic growth did the undoing for credit card companies in general and LG Card company in particular. The company had a shy with bankruptcy twice but was saved due to government intervention.

Pedagogical Objectives:

• To discuss whether the Korean government’s action was justified and whether the LG Card bailout is a financially prudent decision.

Keywords : Bailout of LG (Lucky Goldstar) credit card company; Financial leverage; Lucky Goldstar (LG) company; Bankruptcy; Credit card market; Asset backed securities; Financial supervisory service; Net interest spread; Household debt; BC card; Kookmin card; Managing in Troubled Times Case Study; Samsung card; Delinquency; Korean Development Bank, Woori Bank; Kim Jin Pyo and Lee Duk Hoon