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ASIA PACIFIC CORPORATE GOVERNANCE

ASIA PACIFIC CORPORATE GOVERNANCE. SESSION 6. Outline. Family ownership Asian financial crisis Japanese corporate governance Reform of corporate governance in the Asia Pacific Corporate governance performance in the Asia Pacific. Central Element of Asia-Pacific Governance.

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ASIA PACIFIC CORPORATE GOVERNANCE

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  1. ASIA PACIFIC CORPORATE GOVERNANCE SESSION 6

  2. Outline • Family ownership • Asian financial crisis • Japanese corporate governance • Reform of corporate governance in the Asia Pacific • Corporate governance performance in the Asia Pacific

  3. Central Element of Asia-Pacific Governance FAMILY OWNERSHIP

  4. Characteristics of Asian Corporate Governance • Generally, the public sector is the major employer; The State plays an interventionist role (SOEs) • High family ownership concentration in the private sector with the exception of Japan; Bank finance instead of market finance • Majority holder will have holding of 50% or more. Minority shareholder protection is limited or non-existent • Opaque disclosure regimes; Information is difficult to obtain • Insider culture: intricate network of cultivated personal relationships

  5. Characteristics of Asian Corporate Governance • High cost/barriers of entry in doing ‘legitimate’ business • Enforcement of laws difficult • Underdeveloped institutions with the exception of Japan, HK & Singapore • Culture of saving face • Independent directors on boards is highly controversial

  6. Concentration of Family Control of Corporate Assets Source: Adapted from Claessens, S., Djankov, S and Lang, L. (2000)

  7. Board Structure • Family ownership and voting control typically result in family domination of the board. • For widely held companies, major international corporate governance codes clearly recommend that the board of directors consist of a majority of directors independent of management and the company, with their main role being to monitor management’s performance. • This issue is subject to wider debate in regard to family-owned firms with concentrated ownership structures. S&P Commentary Report 2005

  8. ASIAN FINANCIAL CRISIS 1997/98

  9. Dimensions of the East Asian Crisis 1997-1998* *(Fall in currency exchange rate for US$ between 30 June 1997 and 3 July 1998. Percentage decline in stock market index between 30 June 1997 and 3 July 1998. Fall in stock market capitalization in US$ billions, between 30 June 1997 and 3 July 1998) Sources: Bank of International Settlements; IMF; World Bank; Asia Week 17 July 1998; Jones Lang Wootton; Dataquest.

  10. Change in Share Indexes of East Asia Region 1997-8 Source: Adapted from Bloomberg IHT

  11. Market Capitalization of Stock Exchanges in Asia Pacific, 1998 Source: Stock Exchanges Respective Annual Reports 1998.

  12. Asia Pacific Stock Markets 1990-2003 Market Capitalization. Total market capitalization is presented on an annual basis from 1990-2003, By Asia Pacific exchange in USD, The Australian Stock Exchange (ASX), Bursa Malaysia (BMA), Hong Kong Exchanges and Clearing (HKEx), Jakarta Stock Exchange (JSX), Korea Exchange (KRX), Stock Exchange of Thailand (SET), Singapore Exchange (SGX),Shanghai Stock Exchange (SSE), and the Taiwan Stock Exchange (TSEC) are represented on the left hand vertical axis. The Tokyo Stock Exchange (TSE) is represented on the right hand vertical axis due to its large size compared to the other markets.

  13. JAPANESE CORPORATE GOVERNANCE

  14. Distribution of Share Ownership in Japan by Type of Shareholder Source: Takaya Seki (2005) and Tokyo Stock Exchange (2006)

  15. The Japanese Model of Transformation Source: Adapted from Japanese External Trade Organization JETRO (2005).

  16. Transitions of Japanese CG 1960-2000 Source: Toriihara (2004)

  17. REFORM OF CORPORATE GOVERNANCE IN THE ASIA-PACIFIC

  18. Asia Pacific Reform of CG Regulation Source: Clarke T. (2006), UTS CCG.

  19. Countries with Higher Concentration of Wealth Show Less Progress on Institutional Reforms

  20. Differences of Board Structures Source: Compiled from CLSA Asia Pacific Markets and ACGA (April 2009)

  21. Corporate Governance Mechanisms in Developing Transition Countries Source: Berglof, E. and Claessens S. (2004)

  22. Corporate Governance Mechanisms in Developing Transition Countries (Berglof & Claessens 2004)

  23. CORPORATE GOVERNANCE PERFORMANCE IN THE ASIA PACIFIC

  24. Corporate Governance in Selected countries of Asia Pacific 2008 (CG Watch Survey, Selected Asia Pacific Countries) Source: Compiled from CLSA Asia Pacific Markets and ACGA (April 2009)

  25. Corporate Governance Category Score in Selected Asia Pacific Countries Source: Compiled from CLSA Asia Pacific Markets and ACGA (April 2009)

  26. Market Capitalization of Selected Asia Pacific Countries 2005 Source: WFE Annual Report 2005

  27. AXISS (2005): Market Capitalization of Regional Stock Markets 2005 (US$ Billion)

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