Who Controls East Asian Corporations?
40 Pages Posted: 20 Apr 2016
Date Written: November 30, 1999
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.
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