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Financial Architecture in East Asia

Author

Listed:
  • Shin-ichi Fukuda

    (Professor, University of Tokyo)

Abstract
In this paper, we explore what is an appropriate design of new financial systems in East Asia. Viewing East Asian financial systems in terms of legal systems and accounting systems, the protection of shareholders and creditors, though weaker than in the UK or America, tends to be higher than the global average. As for the level of concentration in stock ownership structure, however, unique East Asian characteristics can be observed in a number of countries. Corporate control by specific families may strengthen relationships with government-related bodies and personnel through lobbying activities based on their economic power. Moreover, an excessive concentration of ownership substantially weakens the influence of minority shareholders protected by the law, and dilutes external discipline. If one takes the stance of prioritizing procurement mechanisms in market-based financial markets, one will naturally assert that the concentration of ownership in East Asian companies provides a major foothold to attaining sustainable economic growth. However, the concentration of corporate controlling rights in the shareholding ratios of specific individual shareholders or parent companies has both good and bad aspects. It produces obstacles in that businesses are run autocratically in line with the wishes of their specific owners, while conversely various agency costs accompanying procurement among interested parties tend to be low. It may be useful, to a degree, for governments to gently intervene in financial markets, thereby retaining these positive traditional aspects of East Asian financial systems while complementing the more fragile aspects of those systems.

Suggested Citation

  • Shin-ichi Fukuda, 2009. "Financial Architecture in East Asia," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 5(1), pages 25-44, October.
  • Handle: RePEc:mof:journl:ppr005b
    as

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    File URL: http://warp.ndl.go.jp/info:ndljp/pid/9908001/www.mof.go.jp/english/pri/publication/pp_review/ppr005/ppr005b.pdf
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    References listed on IDEAS

    as
    1. Takatoshi Ito & Anne O. Krueger, 1996. "Financial Deregulation and Integration in East Asia," NBER Books, National Bureau of Economic Research, Inc, number ito_96-1.
    2. Ito, Takatoshi & Krueger, Anne O. (ed.), 1996. "Financial Deregulation and Integration in East Asia," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226386713, September.
    3. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, April.
    4. Tang, Shui-Yan, 1995. "Informal credit markets and economic development in Taiwan," World Development, Elsevier, vol. 23(5), pages 845-855, May.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Yamamoto, Shugo, 2014. "Transmission of US financial and trade shocks to Asian economies: Implications for spillover of the 2007–2009 US financial crisis," The North American Journal of Economics and Finance, Elsevier, vol. 27(C), pages 88-103.

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    More about this item

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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