This paper was developed with financial support from the SBF Bourse de Paris and the New York Stock Exchange, and the assistance of George Sofianos, Bill Tschirhart, and Didier Davidoff is gratefully acknowledged. We appreciate comments received on this paper from Anthony Boardman, Bernardo Bortolotti, Narjess Boubakri, JeanClaude Cosset, Kathy Dewenter, Alexander Dyck, Ivan Ivanov, Ranko Jelic, Claude Laurin, Marc Lipson, Luis Lopez-Calva, John McMillan (the editor), Harold Mulherin, Rob Nash, John Nellis, David Newberry, David Parker, Enrico Perotti, Annette Poulsen, Ravi Ramamurti, Susan Rose-Ackerman, Nemat Shafik, Mary Shirley, Aidan Vining and three anonymous referees. Additionally, we appreciate comments received from participants at the NYSE/Paris Bourse Global Equity Markets conference (Paris, December 1998), the Harvard Institute for International Development Privatization Workshop (June 2000), the International Federation of Stock Exchanges' Third Global Emerging Markets Conference (Istanbul, April 2000), four World Bank and/or International Finance Corporation meetings, two OECD conferences (Paris and Beijing), the 1999 Conference on Privatization and the Kuwaiti Economy in the Next Century, the 1998 Financial Management Association meeting, the 1999 European Financial Management Association meeting, the Fondazione ENI Enrico Mattei (FFEM), the Swiss Banking Institute and Credit Suisse, and seminars at the City University Business School (London), London Guildhall University and the University of Oklahoma. All remaining errors are the authors' alone. Please address correspondence to: William L. Megginson Price College of Business 307 West Brooks, 205A Adams Hall The University of Oklahoma Norman, OK 73019-4005 Tel: (405) 325-2058; Fax: (405) 325-1957 e-mail:...

We examine the separation of ownership and control for 2,980 corporations in nine East Asian countries. In all countries, voting rights frequently exceed cash-#ow rights via pyramid structures and cross-holdings. The separation of ownership and control is most pronounced among family-controlled "rms and small "rms. More than two-thirds of "rms are controlled by a single shareholder. Managers of closely held "rms tend to be relatives of the controlling shareholder's family. Older "rms are generally family-controlled, dispelling the notion that ownership becomes dispersed over time. Finally, signi"cant corporate wealth in East Asia is concentrated among a few families. � 2000 Elsevier Science S.A. All rights reserved. JEL classixcation: G32; L22

I test whether corporate governance is ineffective in emerging markets by estimating the link between CEO turnover and firm performance for over 1,200 firms in eight emerging markets. While previous papers on corporate governance in emerging markets have studied corporate governance mechanisms, such as concentrated ownership, I study a corporate governance outcome: are poorly performing managers replaced? Others have answered this question in the affirmative for the United States and other developed countries. This paper is the first to address this question for emerging markets. I find that CEOs of emerging market firms are more likely to lose their jobs when their firm's performance is poor, suggesting that corporate governance is not ineffective in emerging markets. Earnings-based measures of performance have the strongest relationship, and stock-return-based measures the weakest relationship, with CEO turnover in emerging markets. The magnitude of the relationship is surprisingly ...

Group affiliation and large block-holders are prevalent features of public corporations in East Asia (Prowse, 1992; La Porta et al, 1999a; Claessens et al., 1998a), in contrast to publicly traded companies in the United States which are typically independent and widelyheld. This provides an opportunity to study the role of group affiliation and large blockholders

This paper examines how political risk affects the structure of project finance (PF) loan syndicates. Using a sample of 495 loan tranches worth $151 billion, we document high levels of debt ownership concentration: the largest single bank holds 20.3% while the top five banks collectively hold 61.2% of a typical PF loan tranche. We show that both syndicate size and concentration are functions of political risk. As country risk increases, debt concentration initially declines, but later increases in high-risk countries, creating what we call a syndicate "smile." In contrast to LaPorta et al (1998), who find that equity ownership and shareholder rights are substitutes, we show that debt ownership and creditor rights are complements. Finally, we show that loan pricing is a positive function of syndicate size and concentration. Viewed collectively, these results are consistent with bank syndicates providing, and charging for, valuable monitoring, deterrence, and recontracting services. On a...

Contrary to the predictions of standard economic theory, capital market liberalization has been a mixed blessing for many countries. Liberalization of debt inflows exposes economies to the risk of crises stemming from sudden changes in investor sentiment. Equity market liberalizations, on the other hand, have promoted growth in almost every liberalizing country. Yet equity market liberalizations have not had as strong an effect as might be expected. To convince outsiders to invest, countries must put in place laws and supporting institutions to protect the rights of minority shareholders. Countries with such protections tend to have larger, more efficient, and more stable stock markets than those that do not. Over a decade ago, Robert Lucas asked the following question: Why doesn’t more capital flow from rich to poor countries? His point was simple. Poor countries have lower capital-to-labor ratios than rich ones. Under standard neoclassical assumptions, the rate of return to capital in poor countries should be higher than in the developed world, attracting capital until risk-adjusted rates of return are equalized. In other words, market pressures should lead to a positive net transfer of resources to less-developed countries, thus boosting their growth rates. Lucas encouraged us to think about the obstacles that prevent

We compare group affiliation in seven East Asian countries and Chile, using data for more than 1,000 publicly traded firms. We document that 75% of listed firms are associated with groups in East Asia, but only 40% in Chile. We find evidence that group structures are used to diversify risks internally as firms' market risk is influenced not only by own characteristics#such as size, price/book ratio#but also by group characteristics, especially in Chile. There are costs to groups, however. For East Asian countries, we find that group structures are used by controlling owners to expropriate other shareholders. On balance, it appears that business groups are not beneficial to shareholders. World Bank. The opinions expressed do not necessarily reflect those of the World Bank. We thank Tatiana Nenova, Gordon Phillips, Andrei Shleifer, and Rene Stulz for helpful suggestions, our discussant Salvador Valdes for useful comments, and Ying Lin for excellent research assistance.

We analyze the relationship between the development, and asset allocation, of contractual savings and firms' capital structures. We develop a simple model of firms' leverage and debt maturity decision. We illustrate the mechanisms through which contractual savings development may affect corporate financing patterns. In the empirical section, we show that the development and asset allocation of contractual savings have an independent impact on firms' financing choices. Different channels are identified. In market-based economies, an increase in the proportion of shares in the portfolio of contractual savings leads to a decline in firms' leverage. In bank-based economies, instead, an increase in the size of contractual savings is associated with an increase in leverage and debt maturity in the corporate sector.

We document a prominent abnormal stock return of-14 % associated with an abnormal trading volume surge of 140 % during the [-120, +20] day window around 482 lockup expirations in the Split-share Structure Reform in China. The abnormal stock returns (trading volumes) are positively (negatively) correlated to firm information transparency and post-reform performance improvement during the lockup periods, suggesting the existence of effective information-based price discovery during the lockups. We present important evidence that institutional investors, especially mutual funds, lead the price discovery process. Our findings confirm the roles of lockups as a tool to signal firm quality and a commitment device to alleviate moral harzard problems.

Against the backdrop of a severe financial crisis and extensive restructuring of the financial sector, this paper investigates the evolution and determinants of connections between firms and banks, and the impact of bank connections on corporate investment. We examine a sample of Thai non-financial companies during 1995-2000, a period straddling the East Asian financial crisis of 1997-98. Before the crisis, bankconnections are common and associated with significantly lower sensitivity of corporate investment to internal cash flow suggesting connected firms have easier access to bank finance. After the crisis, far fewer firms are bank-connected firms largely due to substantial changes in the ownership and governance of banks following regulatory reform and financial sector restructuring. Post-crisis, there is no longer a significant difference in investment-cash flow sensitivity of (formerly) connected and non-connected firms suggesting that bank connections are no longer of value. After the crisis, investment decisions appear to be more efficient, and the economy less crisis-prone given the reduced link between cash flow shocks and subsequent investment and output.