Financial Crisis And The Information Asymmetry

Since 1980s, there is a noticeable phenomenon in international economy, that is, with the trend of financial liberalization financial crises have happened from time to time all over the world. However, the Asian financial crisis happened in July, 1997 is different from the crises before. It happened under the circumstance of the deepening of economic and financial globalization, deregulation in 1990s. It also challenged the existing economy and finance theory.Financial crisis in this article is because of serious adverse selection and moral hazard, financial market is suddenly broke off that it can't give finance support to most productive person. This piece of view was presented by Mishkin's article on World Bank Economic Annual Meeting in 1996.Based on the Information Theory, this article treats Korean financial crisis as main research point, analyses the relationship between asymmetric information and financial crisis. The author also introduces how to solve economic problems in Korea relating to asymmetric information in order to give some useful experience to some developing countries including China.This paper includes four chapters. Chapter one makes clear the purpose of the whole paper, briefly introduces the first and second generation of financial crisis model and gives a definition to financial crisis. Chapter two points out asymmetric information in financial field, that is adverse selection, moral hazard and financial instability. To probe into the genetic mechanism of financial crisis, the author primarily introduces Models of Moral Hazard Crisis梩he third generation of financial crisis model, describes some signs happening before financial crisis. Chapter three tests the coincidence between asymmetric information theory and Korean financial crisis. Chapter four first reviews the procedures of Chinese financial liberalization, then discusses the factors causing financial crisis in modern market economy and gives some advises to current situation.