Corporate Governance in East Asia
The Asian Financial Crisis of 1997-98 was seen as a consequence of poor corporate governance throughout East Asia. Lax corporate governance could be seen in weak internal controls, poor financial reporting and auditing, lack of discretion by boards of directors, mistreatment of minority shareholders and poor enforcement of penalties for law breakers. Throughout East Asia the interest in corporate governance has always been sporadic, however after the Financial Crisis governments and corporations realised a need to improve governance standards in order for the economies to regain any momentum. This paper examines the changes in corporate regulation and corporate governance in recent years. It will also compare the new regulations and practices with international standards to gauge how far East Asia has come. Assisting in the analysis of transition, this paper will examine the above through the economy of South Korea, thus allowing for a more in-depth analysis exploring local problems that have and have not been addressed since the crisis. The problems that have been addressed in South Korea include transparency, minority shareholder rights and creditor rights.
Following the crisis many amendments were made to ¡§enhance transparency, credibility and international comparability of Korean accounting standards¡¨ (Park, 1999:5). These amendments were prescribed to encourage investment based on performance rather than misleading information and reputation. In 1999, the Korean Commercial Code insisted in upgrading transparency in corporations and especially the major Chaebol (EAU, 2002:44). For listed firms this meant annual reports needed to be more comprehensive and that any significant changes that could possibly affect s ...