Corporate Financing in East Asia Before the 1997 Crash

67 Pages Posted: 14 Feb 2009

See all articles by Gishan Dissanaike

Gishan Dissanaike

University of Cambridge - Judge Business School

Imran Markar

McKinsey & Co. Inc.

Date Written: November 28, 2008


Some argue that corporate finance and governance practices were among the root causes of the Asian crisis. It is alleged that high and increasing corporate debt ratios were partly to blame. This claim is overstated: Only South Korea and arguably Thailand had leverage ratios significantly above the G7 range and only South Korea had an income-gearing ratio higher than the G7. Although the reliance on short-term debt was high, there was no drastic change in the maturity structure of debt before the crash. However, conventional factors are relatively more successful in explaining leverage for firms that were less closely connected to the relationship-based financing system. Our paper links to ongoing research on investor protection, cronyism, connections between business and government, and business groups. It ends by commenting on the 2008 financial crisis, currently engulfing the world, and highlights some similarities and paradoxes.

Keywords: Capital Structure, Leverage, Financial crises, South-east Asia, emerging markets, Chaebol, Hong Kong, Malaysia, Indonesia, Singapore, South Korea, Thailand

JEL Classification: G3, N25, O57, O53, F34, F01

Suggested Citation

Dissanaike, Gishan and Markar, Imran, Corporate Financing in East Asia Before the 1997 Crash (November 28, 2008). Available at SSRN: or

Gishan Dissanaike (Contact Author)

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+441 223 339626 (Phone)
+441 223 339701 (Fax)

Imran Markar

McKinsey & Co. Inc. ( email )

Konigsallee 60C
Chicago, IL Quebec 60603
United States

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