accentuated the extent of depreciations and stock market declines in the Asian
financial crisis.
Overall, the nine East Asian countries all have high family ownership, ap-
proximately on average about 50% except Japan.^22 For example, Indonesia has
the highest concentrated family ownership of about 72%, Malaysia and Thai-
land both score about 67% and 62% respectively. Hong Kong, Singapore, and
Taiwan are also classified as family-based corporate governance regimes. Hong
Kong documents that 53% of all listed companies in Hong Kong have one
shareholder or one family group holding more than 50% of issued capital.^23
Singapore has very high concentrated ownerships both in family and state scor-
ing 55% and 24% respectively.^24 Taiwan’s 90% of total companies consists
mainly of small- and medium-sized enterprises (SMEs) and family-control re-
mains a dominant characteristic even in large corporations.^25
This unique family ownership has led to a relationship-based corporate gover-
nance regime whereby less transparency on corporate governance practices such
as disclosure of financial information is expected than in market-based regimes.
3.Bank lending corporate governance regime.Banks in emerging markets are char-
acterized by the government which intervened extensively in lending decisions.
This has led to little interest in deriving good disclosure from the companies. Ex-
amples are Korea, Indonesia, and Malaysia, where the government would act as
ade factoguarantor for loans extended to companies in targeted industries.
Gul and Kealey’s^26 study highlighted the lack of financial transparency in
Korean chaebols which are controlled by family members and linked to influ-
ential politicians and bankers.^27 Similar problems also existed with the huge
Japanese conglomerates or keiretsus with their close banking ties.^28. These
lending decisions of these banks were made primarily on the basis of relation-
ship rather than on an objective assessment of the prospects of the company.
These banking lending relationships generally characterize the lack of effective
corporate governance mechanisms and lack of transparency in these bank lend-
ing corporate governance regimes.
4.Government affiliated corporate governance regime.Another significant rela-
tionship based corporate governance system is the government affiliated
regime. China has very high state ownership with 64% and 65% of total shares
issued on Shanghai and Shenzhen markets, respectively.^29 Lin^30 also stated that
the non–freely tradeable state and legal person shares together account for the
majority of these listed companies in China.24.3 CORPORATE GOVERNANCE REGIMES 24 • 5(^22) Claessesn et al 2000.
(^23) Hong Kong Society of Accountants, 1995, 1997.
(^24) Claessens et al., 2000.
(^25) Taiwan Securities and Future Institute, 2001.
(^26) Gul and Kealey, 1999.
(^27) Korea’s 30 largest chaebols had very high average debt–equity ratios (348% in 1995, 519% in
1997). Some chaebols’ debt–equity ratios even exceeded 1000%. Korean banks continued their lending
to high debt–equity firms with some even with negative equity suggesting that the financial institutions
were not making their lending decisions based on the chaebols’ financial performance (Joh, 2001).
(^28) Gul, 1999.
(^29) Shanghai Securities Exchange Year Book, 1998.
(^30) Lin, 2000.