Corporate governance in the Asian financial crisis

Johnson, Simon; Boone, Peter; Breach, Alasdair; Friedman, Eric

doi:10.1016/s0304-405x(00)00069-6

Cited by 1,418 publications

(904 citation statements)

References 21 publications

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“…Austria or the Czech Republic) the value of controlling blocks is much higher than in the chaebol-dominated Korean economy. Johnson, Boone, Breach and Friedman (2000) suggest that tunneling is common in countries where investor protection is low, and that it is especially severe in crisis periods. Countries that were hit hardest by the Asian financial crisis are, according to this view, countries associated with poor corporate governance and pervasive tunneling -for example, Korea or Indonesia, where corporate groups are especially powerful.…”

Section: Iii2 Groups Pyramids and Tunnelingmentioning

confidence: 99%

Business Groups in Emerging Markets: Paragons or Parasites?

Khanna¹,

Yafeh²

2010

Oxford Handbooks Online

357

630

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Diversified business (or corporate) groups, consisting of legally independent firms operating in multiple markets, are ubiquitous in emerging markets and even in some developed economies. The study of groups, a hybrid organizational form between firm and market, is of relevance to industrial organization, corporate finance, development, economic growth and other domains of economic inquiry. This survey begins with stylized facts on groups around the world, and proceeds to a critical review the existing literature, which has focused almost entirely on groups as diversified entities and on conflicts between controlling and minority shareholders. Other schools of thought on the political economy of corporate groups, on groups and monopoly power, and on groups as networks are discussed next. We then proceed to promising, yet virtually unexplored, alternative lenses for viewing groups, for example, as quasi venture-capitalists or as family-based structures. The analysis points out important biases in the literature including the avoidance of a serious discussion of the origins of business groups, and the unfounded assumption that rentseeking is the only feasible political economy equilibrium in an interaction between groups and the government. We note that the empirical tendency to use recent data implies that the vast majority of studies exploit cross-sectional variation; the absence of (long) time-series data ensures that some conceptually important issues, such as how groups shape the environment in which they operate, receive relatively little attention. Lastly, we outline an agenda for future research. AcknowledgementsWe are grateful to Kee

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Section: Iii2 Groups Pyramids and Tunnelingmentioning

confidence: 99%

Business Groups in Emerging Markets: Paragons or Parasites?

Khanna¹,

Yafeh²

2010

Oxford Handbooks Online

357

630

View full text Add to dashboard Cite

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“…Fisman and Sarria-Allende (2004) and Klapper, Laeven, and Rajan (2004) show that onerous barriers appear to reduce growth and entry in naturally high entry sectors and o¤er evidence against the notion that such barriers serve e¢ ciency purposes. Johnson et al (2002) …nd evidence of high marginal returns at a low level of capital investment, as well as tight …nancial constraints for poor individuals.…”

Section: Related Literaturementioning

confidence: 99%

“…Bankrupty in Thailand typically takes up to 10 years and creditors ultimately receive very little (Foley, 1999). For evidence from the Asian crisis that tunnelling may be worse in recessions, see Johnson et al, 2000. structure, per se highly correlated with corruption, do not seem to explain pro…t changes or exit rates signi…cantly. This appears consistent with our explanation based on lobbying.…”

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confidence: 99%

The Political Economy of Financial Fragility

Feijen

Perotti

2005

SSRN Journal

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While …nancial liberalization has in general favorable e¤ects, reforms in countries with poor regulation is often followed by …nancial crises. We explain this variation as the outcome of lobbying interests capturing the reform process. Even after liberalization, market investors must rely on enforcement of investor protection, which may be structured so as to block funding for new entrants, or limit their access to re…nance after a shock. This forces ine¢ cient default and exit by more leveraged entrepreneurs, protecting more established producers. As a result, lobbying may deliberately worsen …nancial fragility. After large external shocks, borrowers from the political elite in very corrupt countries may successfully lobby for weak enforcement, and retain control of collateral. We provide evidence that industry exit rates and pro…t margins after banking crises are higher in the most corrupt countries.

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“…Krugman (1999) ISBN-13: 978-0-19-923058-7, doi:10.1093/acprof:os o/9780199230587.001.0001 combined with declining sales and higher interest rates weaken the corporate sector and, in turn, the financial system. Johnson et al (2000) also show how weak corporate governance might hamper the economy and lead to currency depreciations and recessions.…”

Section: Risk Managementmentioning

confidence: 99%

The Benefits and Risks of Financial Globalization

Schmukler¹

2008

Capital Market Liberalization and Development

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Corporate governance in the Asian financial crisis

Cited by 1,418 publications

References 21 publications

Business Groups in Emerging Markets: Paragons or Parasites?

Business Groups in Emerging Markets: Paragons or Parasites?

The Political Economy of Financial Fragility

The Benefits and Risks of Financial Globalization

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