The Rise of Foreign State Ownership in East Asia: Domestic Political Determinants and Stabilizing Effects

43 Pages Posted: 11 Jun 2015 Last revised: 12 Jun 2015

See all articles by Richard W. Carney

Richard W. Carney

China Europe International Business School (CEIBS)

Date Written: May 28, 2015

Abstract

Since the Asian Financial Crisis of 1997, the prevalence and transparency of state ownership – both domestic and foreign -- has exhibited considerable variance across the region. To explain this puzzle, I argue that a tight focus on two dimensions of politics yields a remarkable degree of analytic purchase: centralization of political control and a regime’s coordination commitments. The centralization of political control refers to whether the executive faces institutional checks on its decision-making power. Coordination commitments concern political leaders’ need to accommodate particularistic or encompassing interests. The theory leads to the expectation that state-owned firms in authoritarian regimes will exhibit greater stability in a period of heightened financial Volatility. Tests conducted on 896 firms around the collapse of Lehman Brothers offer support for this expectation.

Suggested Citation

Carney, Richard W., The Rise of Foreign State Ownership in East Asia: Domestic Political Determinants and Stabilizing Effects (May 28, 2015). CIFR Paper No. WP060/2015, Available at SSRN: https://ssrn.com/abstract=2617120 or http://dx.doi.org/10.2139/ssrn.2617120

Richard W. Carney (Contact Author)

China Europe International Business School (CEIBS) ( email )

Shanghai-Hongfeng Road
Shanghai 201206
Shanghai 201206
China

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