ABSTRACT
It is commonly agreed that the 1997 Asian financial crisis was mainly the result of structural weaknesses – i.e. a lack of effective corporate governance (CG) and transparency – in many of Asia’s financial markets and institutions. Misinvestment, over borrowing, and low quality disclosures were blamed on the absence of proper checks and balances to monitor Asia’s tycoons. Many banks were controlled by owner-managers, and the boards of directors played limited roles in much connected lending. Growth was more important than returns and liquidity, and risk management was usually poor. In fact, there was a tendency for the less transparent markets in the region (such as Thailand, Malaysia, Japan, and Indonesia) to be subject to more volatile shocks than the more transparent markets (such as Hong Kong, Taiwan, and Singapore) (Ho, 2000). Analysts agree that the reason for the relatively smaller effect of the crisis on Hong Kong’s businesses was the territory’s established CG regime. Thus, a solution to restore international investors’ confidence in the Asian corporate sector and attract more capital inflow has been to strengthen its CG and disclosure. Over the last several years, most East Asian economies have been actively reviewing and improving their CG and transparency. However, only a few have made substantial progress.
