Oct. sees largest no. of bankrupt companies this year

Last month, the number of companies that went bankrupt recorded the highest ever this year. However, as the number of bankruptcies involving large sums declined, the ratio of dishonored bills went down slightly compared to September.

According to the Bank of Korea (BOK) Friday, the number of companies that failed in October numbered 606, exceeding 600 companies for the first time this year. Except for January and July, when 599 and 564 companies went bankrupt, respectively, the figure stayed below 500 per month this year.

The rise in the number of bankrupt companies is attributed to the decrease in corporate loans by banks and financial institutions and the freeze in the corporate bond market.

¡°The number of failed companies is not at a serious level compared to that of 1997-1998,¡± said a BOK official. It appears that the rise in the number of new companies set up this year has led to less competitive firms being weeded out, he said.

The ratio of dishonored bills based on amount recorded 0.22 percent, a 0.08 percent drop from the previous month¡¯s 0.30 percent. The BOK said that the drop was a result of the shock dying out from large-scale bankruptcies caused by the orders for Korea Merchant Bank and Central Merchant Bank to halt operations in September.

Meanwhile, the number of new companies set up last month in eight major cities, including Seoul and Pusan, stood at 2,990, an increase of 360 over September¡¯s 2,630. The October figure also represents the first rebound from a three-month decline in the number of new companies that began in July. However, the increase in the number of failed companies caused the ratio of new companies to failed companies to stand at 11.6, the lowest since May 1999.

Chung Kyung-Joon news91@donga.com