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Cronyism and Capital Controls: Evidence From Malaysia

AFA 2002 Atlanta Meetings

41 Pages Posted: 1 Sep 2001  

Simon Johnson

Massachusetts Institute of Technology (MIT) - Entrepreneurship Center; National Bureau of Economic Research (NBER)

Todd Mitton

Brigham Young University - J. Willard and Alice S. Marriott School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: August 20, 2001

Abstract

The initial impact of the Asian financial crisis in Malaysia reduced the expected value of government subsidies to politically favored firms. Of the estimated $60 billion loss in market value for politically connected firms from July 1997 to August 1998, roughly 9% can be attributed to the fall in the value of their connections. Firing the Deputy Prime Minister and imposing capital controls in September 1998 primarily benefited firms with strong ties to Prime Minister Mahathir. Of the estimated $5 billion gain in market value for Mahathir-connected firms during September 1998, approximately 32% was due to the increase in the value of their connections. The evidence suggests Malaysian capital controls provided a screen behind which favored firms could be supported.

Notes: Former title: Who Gains from Capital Controls? Evidence from Malaysia

Suggested Citation

Johnson, Simon and Mitton, Todd, Cronyism and Capital Controls: Evidence From Malaysia (August 20, 2001). AFA 2002 Atlanta Meetings. Available at SSRN: https://ssrn.com/abstract=281961 or http://dx.doi.org/10.2139/ssrn.281961

Simon Johnson

Massachusetts Institute of Technology (MIT) - Entrepreneurship Center ( email )

United States
617-253-8412 (Phone)
617-258-6855 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Todd Mitton (Contact Author)

Brigham Young University - J. Willard and Alice S. Marriott School of Management ( email )

Provo, UT 84602
United States
801-422-1763 (Phone)

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