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We exploit the 1997 Asian financial crisis to show that credit rating concerns affect firms' corporate governance. We treat the crisis as an exogenous shock that led to improvements in the informativeness of Korea's credit rating system and find that credit rating concerns affect corporate governance following the crisis, but not before the crisis. Moreover, this effect is concentrated in firms that are in chaebol business groups, consistent with their increased dependence on external financing. Finally, we find that firms that were particularly affected by the reforms demonstrate an increased reliance on debt that is dependent on credit ratings, consistent with our hypothesized effects of this exogenous shock. Our paper presents a novel approach to evaluate whether managers would improve their firms' corporate governance in response to their credit rating concerns, and highlights the wide-ranging effects of reforms that are implemented due to financial crises.
This report reflects long-term, in-depth discussion and debate by participants in the Latin American Roundtable on Corporate Governance.
'Investor Protection and Corporate Governance' analyzes the impact of corporate governance on firm performance and valuation. Using unique datasets gathered at the firm-level the first such data in the region and results from a homogeneous corporate governance questionnaire, the book examines corporate governance characteristics, ownership structures, dividend policies, and performance measures. The book's analysis reveals the very high levels of ownership and voting rights concentrations and monolithic governance structures in the largest samples of Latin American companies up to now, and new data emphasize the importance of specific characteristics of the investor protection regimes in several Latin American countries. By and large, those firms with better governance measures across several dimensions are granted higher valuations and thus lower cost of capital. This title will be useful to researchers, policy makers, government officials, and other professionals involved in corporate governance, economic policy, and business finance, law, and management.
The Political Economy of Business Ethics in East Asia: A Historical and Comparative Perspective deals with modes of ethical persuasion in both public and private sectors of the national economy in East Asia, from the periods of the fourteenth century, to the modern era. Authors in this volume ask how, and why, governments in pre-modern Joseon Korea, modern Korea, and modern Japan used moral persuasion of different kinds in designing national economic institutions. Case studies demonstrate that the concept of modes of exchange first developed by John Lie (1992) provides a more convincing explanation on the evolution of pre-modern and modern economic institutions compared with Marx’s modes of production as historically-specific social relations, or Smith’s free market as a terminal stage of human economic development. The pre-modern and modern cases presented in this volume reveal that different modes of exchange have coexisted throughout human history. Furthermore, business ethics or corporate social responsibility is not a purely European economic ideology because manorial, market, entrepreneurial, and mercantilist moral persuasions had widely been used by state rulers and policymakers in East Asia for their programs of advancing dissimilar modes of exchange. In a similar vein, the domination of the market and entrepreneurial modes in the twenty-first century world is also complemented by other competing modes of change, such as state welfarism, public sector economies, and protectionism. Compares Chinese, Japanese, and Korean business ethics from a comparative and historical context Explores recent theoretical approaches to capitalist development in modern history in non-Western regions Discusses the theoretical usefulness of new institutionalism, modes of exchange, and neoclassical discussions of business ethics Evaluates historical texts in their own languages in its attempt to compare Chinese, Japanese, and Korean business ethics in the pre-modern and modern times
After years of strong performance, Korea’s economy entered a crisis in 1997, owing largely to structural problems in its financial and corporate sectors. These problems emerged in the second half of that year, when the capital inflows that had helped finance Korea’s growth were reversed, as foreign investors—reeling from losses in other Southeast Asian economies—decided to reduce their exposure to Korea. This paper focuses on the sources of the crisis that originated in the financial sector, the measures taken to deal with it, and the evolution of key banking and financial variables in its aftermath.
This survey examines the vibrant academic literature on environmental, social, and governance (ESG) investing. While there is no consensus on the exact list of ESG issues, responsible investors increasingly assess stocks in their portfolios based on nonfinancial data on environmental impact (e.g., carbon emissions), social impact (e.g., employee satisfaction), and governance attributes (e.g., board structure). The objective is to reduce exposure to investments that pose greater ESG risks or to influence companies to become more sustainable. One active area of research at present involves assessing portfolio risk exposure to climate change. This literature review focuses on institutional investors, which have grown in importance such that they have now become the largest holders of shares in public companies globally. Historically, institutional investors tended to concentrate their ESG efforts mostly on corporate governance (the “G” in ESG). These efforts included seeking to eliminate provisions that restrict shareholder rights and enhance managerial power, such as staggered boards, supermajority rules, golden parachutes, and poison pills. Highlights from this section: · There is no consensus on the exact list of ESG issues and their materiality. · The ESG issue that gets the most attention from institutional investors is climate change, in particular their portfolio companies’ exposure to carbon risk and “stranded assets.” · Investors should be positioning themselves for increased regulation, with the regulatory agenda being more ambitious in the European Union than in the United States. Readers might come away from this survey skeptical about the potential for ESG investing to affect positive change. I prefer to characterize the current state of the literature as having a “healthy dose of skepticism,” with much more remaining to be explored. Here, I hope the reader comes away with a call to action. For the industry practitioner, I believe that the investment industry should strive to achieve positive societal goals. CFA Institute provides an exemplary case in its Future of Finance series (www.cfainstitute.org/research/future-finance). For the academic community, I suggest we ramp up research aimed at tackling some of the open questions around the pressing societal goals of ESG investing. I am optimistic that practitioners and academics will identify meaningful ways to better harness the power of global financial markets for addressing the pressing ESG issues facing our society.
This Toolkit provides an overall framework with practical tools and information to help policymakers design and implement corporate governance reforms for state-owned enterprises. It concludes with guidance on managing the reform process, in particular how to prioritize and sequence reforms, build capacity, and engage with stakeholders.
Over the last twenty-five years, there has been an acceleration in the move from government regulation towards privatization. Governance, Regulation, and Privatization in the Asia-Pacific Region is the first thoroughgoing account of the relative success of the different approaches to privatization as undertaken in Korea, China, Australia, and Japan. In most contexts, privatization is expected to yield greater efficiency and cost effectiveness while avoiding the corruption and bloated budgets of government regulation or monopoly control. But broad-scale privatization, if ill designed, has also yielded its share of difficulties in East Asia. Privatization sometimes has created a vacuum in corporate governance for some of the region's most important industries and in some cases merely reinstated the monopoly-like configurations. The papers presented in this book discuss the experiences of privatization in several industries, including railroad and telecom, corporate governance problems, accounting issues, and challenges for the future in East Asian countries. The first section is theoretical in nature and proposes boundaries among government protection, market freedom, and shareholder expectations. The second part is constituted by country case studies, beginning with an analysis of both the Korean financial crisis that followed its 1997 law to privatize large, public sector corporations and the new ways Korean corporations finance themselves. Following is an evaluation of China's approach to privatization, with an in-depth look at the financial transitions of companies slated for initial public offering. Providing provocative examples of the methods of privatization in the Asia-Pacific region specifically, these papers will be of huge import to any economist or policymaker interested in transposing those successes for their own region.