Corporate Govornance in Asia: A Survey
Stijn Claessens (Finance Group, University of Amsterdam, and School of Business and Management)
Joseph P. H. Fan (The Hong Kong University of Science and Technology)

Corporate governance has received much attention in recent years, partly due to the Asian financial crisis. We review the literature on corporate governance issues in Asia to develop region-specific and general lessons. Much attention has been given to poor corporate sector performance, but most studies do not suggest that Asian firms were badly run. The literature does confirm the limited protection of minority rights in Asia, allowing controlling shareholders to expropriate minority shareholders. Agency problems have been exacerbated by low corporate transparency, associated with rent-seeking and relationship-based transactions, extensive group structures and diversification, and risky financial structures. The controlling shareholder bears some of agency costs in the form of share price discounts and expenditures on monitoring, bonding and reputation building. The Asian financial crisis further showed that conventional and alternative corporate governance mechanisms can have limited effectiveness in systems with weak institutions and poor property rights. Overall, the understanding of the determinants of firm organizational structures, corporate governance practices and outcomes remains limited, however.
*We would like to thank Simon Johnson, Larry Lang, Karl Lins, Yupana Wiwattanakantang and the editor, Sheridan Titman, for their very useful comments.

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What Explains Cross-country Industry Growth Patterns? Trade, Development and the Equity Financing Channel
Yuk Ying Chang (Department of Finance, Hong Kong University of Science and Technology)
Sudipto Dasgupta (Department of Finance, Hong Kong University of Science and Technology)

We test theories that examine how economic and financial development affect cross-country industry growth patterns. Finance theory suggests that financial development affects growth by lowering the cost of external finance. This has the implication that industries in more finance-hungry sectors will grow faster in countries where financial markets are more developed. In addition, if financing constraints are lessened when stock market performance is high, firms in sectors more dependent on external finance should grow more rapidly following periods of good stock market performance. Trade and development theories, on the other hand, imply that a country’s product-mix and the pattern of industrial growth reflect which stage of development it is in and its factor endowments. Thus, one implication of trade/development theories is that countries that are close to each other in terms of GDP per capita should have similar patterns of industrial growth. Our tests find support for each of these theories.

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Why Do Governments Privatize Abroad?
Bernardo Bortolotti (University of Turin and Fondazione Eni Enrico Mattei)
Marcella Fantini (National Economic Research Associates, Rome)/Carlo Scarpa (University of Brescia)

Privatization Through global equity market placement has largely contributes to financial market development and integration. Despite the relevance of the fact, the reasons underlying governments’ choice to sell shares of privatized companies abroad are still poorly understood. This paper presents new evidence for a sample of 233 share issue privatizations in 20 OECD countries, showing that redistribution concerns and the objective of domestic financial market development make domestic privatization more likely. However, if budget constraints are binding, governments tend to sell abroad a larger quantity of shares, particularly when corporate governance at home is weak.
*We would like to thank the anonymous referee and the editor for their suggestions. We also thank Ron Anderson, Andreas Bascha, Laurence Broze, Bill Megginson, Marco Pagano, Domenico Siniscalco, Luigi Zingales and the seminar participants at CIFRA, Amsterdam, CEPR/CSEF/NYSE conference in Capri, EFA2000, 2001 NYSE Global Equity Markets in Transition Conference at Hawaii for helpful comments and discussions. Fabio Merlino and Mara Grasseni provided excellent research assistance. Fabrizio Balassone, Matteo Bugamelli, Andre Leger, Gerrit de Marez Oyens and the Research Departments of the Dublin and Lisbon Stock Exchanges provided great help with data. This research has been supported by Fondazione Eni Enrico Mattei, Milan and is part of the project ‘Privatisation and Financial Market Development’, funded by the European Commission (contract no. HPSE-CT-1990-00007). The usual disclaimer applies.

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