Corporate Governance and Investment in East Asian Firms: Empirical Analysis of Family-Controlled Firms

Masaharu Hanazaki, 正晴 花崎, マサハル ハナザキ and Qun Liu

No 2006-12, CEI Working Paper Series from Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University

Abstract: In this paper, we analyze in quantitative terms the influence of family control on the pattern of corporate investment, using firm-level data from Indonesia, Korea, Malaysia, the Philippines, and Thailand to regress the investment function and focusing on the family ownership structure that characterizes East Asian corporate governance. Our results present evidence that family-controlled firms, the majority of the firms in our data set, face more severe internal financing constraints than non-family-controlled firms. Our findings suggest that the mechanism in East Asian countries, which is commonly assumed to permit smooth reallocation of money among investment projects through the internal capital markets of family-controlled group firms, does not work well, and that, coupled with the difficulty of obtaining financing from external capital markets, it my lead to strict internal financing constraints on investment.

Keywords: Family-controlled firm; Corporate Investment; Asian crisis (search for similar items in EconPapers)
JEL-codes: E22 G32 O53 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2006-10
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-mac and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hitcei:2006-12

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