A Cross-Firm Analysis of the Impact of Corporate Governance on the East Asian Financial Crisis

In a sample of 399 firms from Indonesia, Korea, Malaysia, the Philippines, and Thailand, firm-level differences in variables related to corporate governance had a significant impact on firm performance during the East Asian financial crisis of 1997-1998. First, indicators of higher disclosure quality (having ADRs and auditors from Big Six accounting firms) are associated with significantly better stock price performance during the crisis. Second, higher outside (but not managerial) ownership concentration led to better performance during the crisis. Finally, diversified firms, particularly those with high variation in investment opportunities across divisions, performed worse than single-segment firms during the crisis.

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