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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Tables Table 1 Real returns on assets in local currency in East Asia 198896
Returns on assets in nominal U S dollars in East Asia 198896
Operational margins in East Asia 198896
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Asia Ayala Corporation Ayala family cash to control cash-flow and control cash-flow rights cash-flow to control coefficient companies concentration control rights controlling owner crisis differences diversification patterns diversified firms E-mail East Asian corporations East Asian economies East Asian firms excess profit margin expropriation family control Figure firm performance firm valuation firm value Globe Telecom group affiliation group-affiliated firms held financial institutions Hong Kong income group independent firms Indonesia industry internal markets investment Japan Korea leverage lower Malaysia mean excess value measure median Mitsubishi Bank multi-segment firms negative Non-monotonic Non-monotonic Non-monotonic number of segments ownership structures P.O Box Philippines pre-crisis quartile ratio of cash ratio of cash-flow relatedness and complementarity relationship between firm returns on assets rights are associated sales growth sample shareholders Singapore single-segment firms statistically significant Table Taiwan China Thailand U.S. dollars U.S. firms ultimate control ultimate owners vertical relatedness voting rights widely held financial