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Corporate Governance and East Asia: Korea, Indonesia, Malaysia, Thailand

May 1999
Stanford King Center on Global Development Working Paper
This paper explores the role of corporate governance in the Asian countries: Korea, Indonesia, Malaysia and Thailand. It argues that the focus in an analysis of corporate governance should be on the provision of external equity finance—the position of outside minority shareholders. The proportion of equity finance in the capital structure of firms is highly correlated with the status of corporate governance. In economies with extensive and concentrated family ownership of publicly traded companies, the mechanisms of corporate governance are likely to be weak. These propositions are examined in a review of the four countries. The paper concludes by recommending that strengthening of the effective limits on conflict of interest transactions by those in control of the firm would be of more immediate benefit than efforts to create managerial monitoring through development of a market for corporate control.