Economic Change and Restructuring

, Volume 38, Issue 1, pp 85–111 | Cite as

Legal Environment, Firm-level Corporate Governance and Expropriation of Minority Shareholders in Asia

  • Chandrasekhar Krishnamurti
  • Aleksandar Sěvić
  • Željo Šević


Claessens et al. (2000, Journal of Financial Economics 58(1–2), 81–112) show that corporate control is substantially enhanced by using pyramid structures and cross-holdings by firms in nine East Asian countries. Claessens et al. (1999, SSRN Working Paper; 2002, Journal of Finance 57(2), 2741–2771) provide empirical evidence regarding expropriation arising from the separation of cash flow from voting rights in Asian firms. Their analysis suggests a high degree of expropriation in Hong Kong, Indonesia, Malaysia, and Thailand. We re-examine the problem of expropriation in Asian firms reported by earlier research. We explore firm-level governance-control structure interactions, and control-legal environment interaction for a set of Asian firms for which we are able to obtain relevant data for all the required variables. The major contribution of this paper is that it jointly examines ownership-control structure, firm-level governance and country-level legal protection available to external suppliers of capital. Using post-crisis data, we find a strong country effect in governance. In general, high control firms in countries with weak legal protection have lower firm-level governance scores in general. On the other hand, high control firms, in countries which have a stronger legal protection environment, signal their intention to not expropriate minority shareholders’ wealth by voluntarily adopting measures to strengthen their discipline and responsibility scores. Contrary to earlier findings, we do not find a relationship between control-ownership wedge and firm value. Furthermore, we do not find any relation between firm-level governance and firm value as measured by Tobin’s Q.


corporate governance expropriation ownership structure 

JEL Classification Numbers

G15 G32 G34 


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Copyright information

© Springer 2006

Authors and Affiliations

  • Chandrasekhar Krishnamurti
    • 1
  • Aleksandar Sěvić
    • 2
  • Željo Šević
    • 3
  1. 1.Division of Banking and Finance, Nanyang Business SchoolNanyang Technological UniversitySingapore
  2. 2.Newcastle Graduate School of BusinessUniversity of NewcastleNewcastleAustralia
  3. 3.Department of Accounting and Finance, The Business SchoolUniversity of GreenwichGreenwich, LondonEngland, UK

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