Corporate Governance in the Asian Financial Crisis 1997-98

Abstract

The "Asian Crisis" of 1997-98 has affected almost all the "emerging markets" open to capital flows. Measures of corporate governance, particularly the effectiveness of protection for minority shareholders, explain the extent of stock market decline better than do standard macroeconomic measures. The explanation is that in countries with weak corporate governance, worse economic prospects result in more stealing by managers and thus a larger fall in asset prices.

JEL Classification: G12, G34