Who Controls East Asian Corporations?

40 Pages Posted: 20 Apr 2016

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

Simeon Djankov

London School of Economics & Political Science (LSE); Peter G. Peterson Institute for International Economics

Date Written: November 30, 1999

Abstract

A study of 2,980 corporations in nine East Asian countries finds more than half of those firms being controlled by a single shareholder. Many smaller and older firms are family-controlled. Wealth is very concentrated in some countries, and links between business and government are extensive, so the legal system has probably been influenced by the prevailing ownership structure.

Claessens, Djankov, and Lang identify the ultimate ownership structure for 2,980 corporations in nine East Asian countries. They find that:

More than half of those firms are controlled by a single shareholder.

Smaller firms and older firms are more likely to be family-controlled.

Patterns of controlling ownership stakes differ across countries. The concentration of control generally diminishes with higher economic and institutional development.

In many countries, control is enhanced through pyramid structures and deviations from one-share-one-vote rules. As a result, voting rights exceed formal cash-flow rights.

Management is rarely separated from ownership control, and management in two thirds of the firms that are not widely held is related to management of the controlling shareholder.

In some countries, wealth is very concentrated and links between government and business are extensive, so the legal system has probably been influenced by the prevailing ownership structure.

This paper-a product of the Financial Economics Unit, Financial Sector Practice Department-is part of a larger effort in the department to uncover the causes of the East Asian crisis.

Suggested Citation

Claessens, Stijn and Djankov, Simeon, Who Controls East Asian Corporations? (November 30, 1999). World Bank Policy Research Working Paper No. 2054. Available at SSRN: https://ssrn.com/abstract=597191

Stijn Claessens (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Simeon Djankov

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

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