corporate governance, competition, and strongfinancestrong re-thinking.pdf

CORPORATE GOVERNANCE, COMPETITION, AND FINANCE: RE-THINKING LESSONS FROM THE ASIAN CRISIS Jack Glen IFC and Ajit Singh University of Cambridge INTRODUCTION This paper examines microeconomic behavior of economic agents—corporations, financial institutions, and governments in emerging economies. It focuses specifically on issues of corporate governance and financing of corporate growth as well as those relating to the nature and degree of competition in these countries. Such questions have not previously received much attention in development literature, which has generally emphasized macro- rather than microeconomic issues. Specifically, there has been scarce recognition of the fact that economic development is actually carried out by organizations and by corporations, large and small. The role of domestic, pri- vate corporations in economic development is a particularly underresearched area.1 The Asian crisis of 1997-2000 has radically changed the research and policy agenda for emerging markets. As a consequence of this crisis, as well as those in Russia, Brazil, Argentina, etc., issues of corporate governance and behavior and the relation- ship between corporations and financial institutions, as well as questions relating to the intensity of competition, now command international attention. A main reason for these changed priorities has arguably been the important thesis concerning the Asian crisis first advanced by leading U.S. policymakers—notably Alan Greenspan [1998] and Larry Summers [Baker, 1998]—and developed further by the International Mon- etary Fund (IMF) (see references below). Alan Greenspan [1998], the chairman of the U.S. Federal Reserve, in his 1998 testimony to a Congressional Comm