Corporate Governance in East Asia and Some Policy Implications

Abstract

Many policymakers and advisors have acknowledged that a weak system of corporate and financial governance played an important role in the East Asia crisis. In a recent report, the World Bank (1998, 67-68) states that "the poor sys¬tem of corporate governance has contributed to the present financial crisis by shielding banks, financial companies, and corporations from market discipline. Rather than ensuring internal oversight and allowing external monitoring, corporate governance has been char¬acterized by ineffective boards of directors, weak internal control, unreliable financial reporting, lack of adequate disclosures, lax enforcement to ensure compliance, and poor audits." However, despite the recent surge of interest in the issue, corporate gover¬nance in most East Asian countries is still not well understood. The purpose of this note is to describe some common characteristics of corporate governance systems in East Asia and to discuss some of their implications to institutional and policy reforms.