East Asia corporations: heroes or villains
East Asian corporations differ from their counterparts in other countries in important ways. Before the recent financial crisis these differences were viewed as one of the reasons for the success of East Asian economies. The crisis altered that view, and many scholars now argue that the weak corporate governance and financing structures of East Asian corporations are partly to blame for the recent crisis. This paper reviews several features of East Asian corporations, showing that they have high leverage and concentrated ownership, are typically affiliated with business groups, and operate in multiple industries. These characteristics affected the performance of corporations prior to the crisis as well as their ability to deal with its aftermath. Each economy's level of development also affected how these characteristics interacted with firm performance and valuation. Finally, the concentration of ownership in the hands of a few large families may have influenced economies' institutional development.
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Asia Asian financial crisis Ayala Corporation Ayala family cash to control cash-flow and control cash-flow rights Claessens Company Handbook control rights controlling owner crisis excess Differences between pre-crisis Distribution of multi-segment diversification patterns diversified firms East Asian corporations East Asian economies East Asian firms excess profit margin expropriation family control Figure financial structures firm performance firm valuation firm value Globe Telecom group affiliation group-affiliated firms Hong Kong income group independent firms Indonesia industry internal markets investment Japan Korea less developed economies leverage lower Malaysia mean excess value measure median multi-segment firms Non-monotonic Non-monotonic number of segments ownership structures Philippine Stock Exchange Philippines pre-crisis and crisis quartile ratio of cash Reform relatedness and complementarity relationship between firm returns on assets sales growth sample Sector shareholders Simeon Djankov Singapore single-segment firms statistically significant Table Taiwan China Thailand U.S. dollars U.S. firms ultimate control ultimate owners vertical relatedness voting rights World Bank