Cost Behavior During the Global Financial Crisis: The Case of Korean Commercial Banks

Using a panel data of Korean commercial banks for the period 1991-2012, I find that the cost behavior of Korean commercial banks has exhibited some mixed evidence. In general, for the pooled sample, total operating costs and other operating costs show anti-cost stickiness, but interest costs indicate cost stickiness. Furthermore, the financial crisis of 2007-2008 attenuated the anti-stickiness of total operating costs and other operating costs and reinforced the stickiness of interest costs during this crisis period. However, the worldwide financial crisis of 2008-2009 triggered by the collapse of Bear Stearns and Lehman Brothers continued to attenuate the anti-stickiness of total operating costs and other operating costs, but did not have any impact on sticky behavior of interest costs during this another crisis period.