Does Law Matter in Asia? Comparing Corporate Governance Regimes in Indonesia and Malaysia

42 Pages Posted: 9 Dec 2021 Last revised: 10 Mar 2022

See all articles by Benedict Sheehy

Benedict Sheehy

University of Canberra

Sarah Yu

University of Canberra

Luther Lie

Independent

Date Written: November 28, 2021

Abstract

Abstract: The question, “does law matter?” reflects a fundamental concern of whether law is worth the attention and investment of public authorities. Often implied in the discussion is that other institutions, whether markets or informal established social practices, are preferable methods for organising the economy and may well do a better job of satisfying individual needs. This paper investigates the proposition that law does matter even in the Asian context where strong informal social practices persist by examining the corporate law of two very similar countries—Indonesia and Malaysia—that have such social practices. Using these two countries allows us to control for non-legal factors that significantly influence economic performance to provide evidence of whether law matters. Using empirical methods, we analyse data from the latest 10 year normal period (i.e. prior to COVID-19 disruption) and find that adoption of laws consistent with G20/OECD Principles of Corporate Governance substantially contributes to a jurisdiction’s economic performance at least as measured by stock market performance.

Keywords: Asia, Development Economics, Does Aaw Matter, Corporate Governance

JEL Classification: P48, P16, O16, O43, O47, O53

Suggested Citation

Sheehy, Benedict and Yu, Sarah and Lie, Luther, Does Law Matter in Asia? Comparing Corporate Governance Regimes in Indonesia and Malaysia (November 28, 2021). Available at SSRN: https://ssrn.com/abstract=3973180 or http://dx.doi.org/10.2139/ssrn.3973180

Benedict Sheehy (Contact Author)

University of Canberra ( email )

Canberra, Australian Capital Territory 2601
Australia

Sarah Yu

University of Canberra ( email )

Canberra, Australian Capital Territory 2601
Australia

Luther Lie

Independent ( email )

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