Journal of Financial Economics 107 (2013) 494–513

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Journal of Financial Economics

journal homepage: www.elsevier.com/locate/jfec

Changes to the ownership and control of East Asian

corporations between 1996 and 2008: The primacy of politics$
Richard W. Carney a,n, Travers Barclay Child b
a
Department of International Relations, School of International, Political and Strategic Studies, College of Asia and the Pacific, Hedley Bull
Centre #130, Australian National University, Canberra ACT 0200, Australia
b
Tinbergen Institute, The Netherlands

a r t i c l e in f o abstract

Article history: We investigate changes to the ownership and control of East Asia’s largest companies in
Received 4 September 2011 1996 and 2008. Newly compiled data for 1386 publicly traded companies at the end of
Received in revised form 2008 are supplemented with existing data on 1,606 publicly traded companies at the
7 December 2011
end of 1996. Two main findings stand out. First, where status quo political arrange-
Accepted 9 January 2012
ments persist, preexisting ownership arrangements go unchanged or become more
Available online 24 August 2012
entrenched. Where major political changes occurred, corporate ownership would
JEL classification: undergo substantial changes. Second, the state has become increasingly important as
G32 an owner of domestic firms as well as foreign firms.
G34
& 2012 Elsevier B.V. All rights reserved.
G38

Keywords:
Corporate ownership
East Asia
Politics

1. Introduction regime to another. These events, in combination with

About a decade ago, researchers compiled data on
corporate ownership across East Asia just prior to the
Asian financial crisis (Claessens, Djankov, and Lang, 2000).
Since then, much has changed. South Korea implemented
substantial corporate governance reforms following the
crisis, Hong Kong became a special administrative region
of China, Indonesia, initiated important democratic
reforms, and Thailand lurched from one form of political
$
We would like to thank Charles Adams, Michael Carney, Stijn
Claessens, Soedradjad Djiwandono, Natasha Hamilton-Hart, and John
Ravenhill for helpful comments. We are grateful to Simeon Djankov for
sharing the 1996 data set with us. We would also like to thank a team of
research assistants who have helped us to compile data including
Kelly Aung, Suvi Dogra, Woo Jun Jie, Pan Rongfang, Hajela Ruchi, and
Raymond Woo.
n 1
Corresponding author. Tel.: þ 61 2 6125 0906;
fax: þ61 2 6125 8010.
E-mail address: richard.carney@anu.edu.au (R.W. Carney).
potentially long-lasting effects from the crisis as well as
governments’ efforts to prevent its recurrence, suggest
that corporate ownership could have undergone substan-
tial changes. This paper shows whether such changes
have occurred and offers an explanation for them.
We investigate the separation of ownership and control
for East Asia’s largest companies in 1996 and 2008.
To this end, we compile data on nine countries’ largest
publicly traded companies for a total of 1,386 firms at the
end of 2008. Data for 1,606 publicly traded firms at the end of
1996 come from the data set compiled by Claessens, Djankov,
and Lang (2000). The countries are Hong Kong, Indonesia,
Japan, South Korea, Malaysia, the Philippines, Singapore,
Taiwan, and Thailand.1 The findings indicate that significant
We recognize that Hong Kong is not a country but a special
administrative region, but to preserve the continuity of the discussion
we refer to it as a country.

0304-405X/$ - see front matter & 2012 Elsevier B.V. All rights reserved.
http://dx.doi.org/10.1016/j.jfineco.2012.08.013
 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513
changes have occurred in nearly every country, though
important patterns persist. Whether countries experienced
major political transformations can best account for the
changes.
Since the Claessens, Djankov, and Lang (2000) paper,
research has primarily focused on family control
(Ahlstrom, Chen, and Yeh, 2010; Heugens, van Essen,
and van Oosterhout, 2009; Jiang and Peng, 2011;
Khanthavit, Polsiri, and Wiwattanakantang, 2003; Liu,
Yang, and Zhang, 2010; Mehrotra, Morck, Shim, and
Wiwattanakantang, forthcoming; Morck, Wolfenzon, and
Yeung, 2005; Peng and Jiang, 2010; Prabowo and
Simpson, 2011; Schulze and Gedajlovic, 2010; Villalonga
and Amit, 2006; Zhang and Ma, 2009). Additional work on
business groups and other types of controlling share-
holders has been done (Carney, Gedajlovic, Hengens, van
Essen, and van Dosterhaut, 2011; Lin, Ma, Malatesta, and
Xuan, 2012; Sato, 2004; World Bank, 2006; Young, Peng,
Ahlstrom, Bruton, and Jiang, 2008). However, a compre-
hensive analysis has not been conducted across all own-
ership categories over time and across numerous East
Asian countries. We seek to fill this gap. To map changes
since 1996 our data set mirrors that of Claessens, Djankov,
and Lang (2000) with respect to the variables and sources
used so as to ensure consistency. East Asia is a particularly
useful region to study changes to corporate ownership
across time because of the large data set that exists just
prior to the Asian financial crisis as well as the numerous
institutional changes that subsequently occurred. We also
see 2008 as a useful point to examine whether changes
have occurred because sufficient time has elapsed since
the crisis for new arrangements to have consolidated their
position.
We find that family control remains the most dominant
form of ownership across East Asia, though widely held
ownership clearly dominates in Japan and Taiwan and is
substantial in both Korea and Thailand. The Philippines has
witnessed the largest increase in family-controlled firms,
while Taiwan has undergone the largest decline. State control
has become particularly important to Southeast Asian coun-
tries in 2008, including Hong Kong, Malaysia, Singapore,
Thailand, and Indonesia, with Hong Kong and Malaysia
exhibiting the largest increases. In 1996, only Singapore and
Malaysia exhibited high levels of state control. Foreign state
ownership has also become evident for firms in nearly every
country in our sample. The separation of ownership and
control has undergone little change for the region as a whole
and remains highest among family-controlled firms.
Among all firms in our sample, control through pyramid
structures has fallen from 41% in 1996 to 31% in 2008. We
also find that among firms with a dominant owner, more
than 86% of them are controlled by a single shareholder as
compared with 44% in 1996. Separation of management from
ownership control remains rare. The top management of
about 71% of firms that are not widely held in 2008 is related
to the family of the controlling shareholder, which is nearly
the same as in 1996 (70%), though substantial changes have
occurred within individual countries.
Among firms with a dominant family owner, the
average number of firms belonging to a single family or
the top families has remained relatively stable over time
495
when looking at East Asia in the aggregate, although
changes have occurred for individual countries. For exam-
ple, we find that family control has increased substan-
tially in Korea, from an average of 1.61 firms per family in
1996 to 3.22 in 2008. Hong Kong and the Philippines, by
contrast, have exhibited the largest declines, going from
1.92 for Hong Kong in 1996 to 1.33 in 2008, and 2.42 for
the Philippines in 1996 to 1.69 in 2008.
Among these family-owned firms, we also study the
prevalence of founders versus heirs through an examina-
tion of firm age, or the age of the business group to which
a firm belongs. We find that more than half of all family-
owned firms (or affiliated business groups) were at least
25 years old for five of the nine countries in 1996. In 2008,
more than half of all family-owned firms (or affiliated
business groups) in each country were at least 25 years
old for every country in our sample. Insofar as firm age
corresponds to a greater likelihood that an heir is likely to
take over from the founder, the proportion of all family-
owned firms with heirs at the helm clearly has increased
for every country in our sample except Japan.
We also investigate the political links of firms with a
dominant family owner and find that, for East Asia in the
aggregate, 44% of these firms exhibit political links in
1996 and only 12.4% exhibit political links in 2008.
Individual countries display varying levels of decline
however. The most dramatic reductions are observed for
Korea ( 66%), Singapore (  54%), Indonesia ( 51%), and
Thailand (  131%).
Our analysis also generates two noteworthy findings
with regard to the role of the state. First, state ownership
has become increasingly important to domestic firms as
well as foreign firms. State ownership leads to firm
behavior that differs from family-owned firms, but this
ownership type has received relatively little attention.
Second, politics offer the best explanation for the owner-
ship changes shown here. Although the financial crisis
could have prompted cosmetic changes to corporate
governance regimes, substantial shifts to prevailing own-
ership arrangements have occurred only when major
political transformations have also taken place.
The paper is organized as follows. Section 2 discusses
the construction of the data and defines the main vari-
ables of interest. Section 3 studies the ultimate owners of
East Asian corporations in our sample, distinguishing
among six types, and considers reasons for changes across
time. Section 4 discusses the evidence on the concentra-
tion of family ownership, the prevalence of founders
versus heirs, and the political connections of these firms.
Section 5 examines various means of enhancing control.
Section 6 shows changes to the separation of ownership
and control of East Asian corporations. Section 7 examines
the political reasons for these changes to countries’ own-
ership arrangements. Section 8 concludes.
2. Construction of the data
The first subsection discusses how we compile the
data set for 2008. The second subsection defines the main
variables used for the analysis with a particular focus on
those pertaining to ownership and control rights.
496 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513
2.1. Data set
The analysis presented in this paper is based on a new
data set capturing the largest publicly traded firms in a
number of East Asian nations. We explicitly seek to
compile data for the same variables that Claessens,
Djankov, and Lang have acquired for 1996 to enable
analysis of change over time. In following Claessens,
Djankov, and Lang (2000), the nine countries in the
sample are Hong Kong, Indonesia, Japan, South Korea,
Malaysia, the Philippines, Singapore, Taiwan, and Thailand.
For technical reasons, the size of the sample is sensitive to the
level of ownership threshold used in the analysis, and so it
varies between 1,296 and 1,386 firms.
As the starting point for our data collection, we draw
the names of the largest two hundred publicly traded
firms (in terms of market capitalization) from each of the
countries’ respective stock exchanges at the end of the
calendar year 2008. We also include data for the two
hundred largest firms for each country as listed in the
Claessens, Djankov, and Lang data set.2 For each of the
firms for our 2008 sample, ownership data were subse-
quently gathered from Thomson Reuter’s Worldscope
2008 database to identify all shareholders owning more
than 5% of the company’s shares. When this information
has not been available through Worldscope, to fill in the
gaps we have turned to Bureau van Dijk’s OSIRIS database
or Gale’s Major Companies of Asia and Australasia 2008
handbook. The corporations in our data set often are
owned by other companies. To trace the ultimate owner-
ship of our large publicly traded corporations, we uncover
the ownership structure of these intermediate sharehold-
ing companies as well. Wherever these shareholding
companies are publicly traded corporations themselves,
we simply repeat the above exercise using the World-
scope and OSIRIS databases to identify their ownership.
If these companies have not been publicly traded, the
process has been more arduous.
The intermediate non-publicly traded firms present in
our ownership data are either state-owned, family-
owned, employee-owned, or are subsidiaries of public or
other nonpublic corporations. To resolve the ownership
structure of these non-publicly traded firms, we broaden
our resources considerably. Our first resort was to turn to
the annual reports of the downstream publicly traded
firm whose ownership we are trying to reveal. Often-
times, through careful reading of this report, the ultimate
owner of the intermediate firm can be identified. When
the annual report was not helpful in this regard, we turn
to the website of the non-publicly traded firm where this
information is sometimes disclosed. We next use various
stock exchange filings indicating the transfer of share
ownership to identify ultimate owners. As a last resort,
where none of the above has been informative, we turn to
2
Claessens, Djankov, and Lang explain that their data set always
covers the largest one hundred firms in terms of market capitalization
and is then supplemented with data for additional firms depending on
availability. Hence, our analysis of their top 200 firms by country is a
useful reflection of each country’s largest firms to draw comparisons
with a country’s two hundred largest firms in 2008.
business reports and newspaper articles revealing the
non-publicly traded company’s owner, either explicitly
or in passing. These resources have been retrieved pri-
marily through the LexisNexis and Alacra Store databases,
as well as Bloomberg Businessweek online.
Using this approach we are able to gather sufficient
ownership data for 1,386 firms when using a 20% share
threshold to define company ownership. We are able to
confidently describe the ownership structure of 1,296
firms when using a 10% share threshold. As a basis for
inclusion in the data set, we require that we are able to
trace all shareholders above a given ownership threshold,
provided their shares are held in blocks sizable enough to
be reported in our resources (typically around 5%). We do,
however, include some firms that are exceptional to this
rule in either of two ways. The first is if there exists an
owner whose identity we cannot trace, but we have
detailed information on a larger owner who claims more
than 50% of the company’s stock. The second is if there
exists share blocks whose owners cannot be traced due to
their being held via a nominee or trust account, but whose
sum total is less than the proportion of shares held by a
revealed owner whose identity we are able to trace. In
either of these cases we are still able to identify the
largest shareholder. Conversely, a company is excluded
from the data set if shares held in trust (or through a
nominee account) amount to a greater proportion of
outstanding shares than that which the largest revealed
shareholder can be shown to control. A company is
also excluded from the data set if there exists a signifi-
cant shareholder whose identity we are unable to discern
due to a lack of information about the intermediate
non publicly traded firm through which these shares
are owned.
An example of the first type of exception is Mandom
Indonesia Tbk Pt. This company is owned (60.78%)
by Mandom Corporation Japan, which is a widely
held corporation. A smaller stake in Mandom Indonesia
(11.31%) is held by Pt Asia Jaya Paramita, whose owner-
ship we were unable to disclose. We, nevertheless,
include this company in our sample at both ownership
thresholds because we are able to trace an ultimate owner
claiming over half the outstanding shares. The second
type of exception can be exemplified with the case of
Singapore Technologies Engineering Ltd. Temasek Hold-
ings, of the Singaporean government, holds 49.32% of the
outstanding shares in this company. Three other share
blocks, which together account for 32.66% of the out-
standing shares, are held via nominee accounts. Despite
our lack of information about the ultimate owner of these
shares, we include the company in our data set because
we can be certain about having traced the largest owner
of the company.
The types of companies we exclude from our data set
for lack of information can be demonstrated with the
following cases. Citiseconline.com Inc, of the Philippines,
is owned (36.6%) by siblings Edward K. Lee and Alexander
C. Yu. There is also an outstanding share block of 61.84%,
which is held through a nominee account, so we exclude
the company from our sample as we cannot be certain
of the identity of its largest shareholder. Thai Central
 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513 497

Table 1
Prevalence of opaque ownership vehicles.
This table presents data for the 200 largest corporations by market capitalization for each country at the end of 2008, including both financial and nonfinancial
institutions. ‘‘Percentage of firms irresolvable’’ indicates the proportion of firms for which the largest owner could not be discerned due to the use of trust
accounts, nominee accounts, or holding companies. ‘‘Percentage of firms with nominee/trust accounts 410%’’ displays the proportion of firms for which at least
10% of outstanding shares are held in one of these accounts. ‘‘Average percentage of shares held through nominee/trust accounts’’ indicates the average percentage
of voting rights held in one of the indicated accounts. ‘‘East Asia nine’’ refers to the average of the nine sample countries for each category.

Hong Indonesia Japan Korea Malaysia Philippines Singapore Taiwan Thailand East Asia
Kong nine

Percentage of firms irresolvable 20.1 33.7 32.3 20.5 21.8 42.7 34.5 17.7 25.5 27.7
Percentage of firms with nominee/trust 1.5 9.5 32.8 0.0 4.1 67.8 66.0 2.5 25.5 23.4
accounts410%
Average percentage of shares held through 0.6 2.2 5.2 0.0 0.9 30.3 25.6 0.3 5.9 7.9
nominee/trust accounts

Chemical Public Company Ltd. is another company that Table 2

fails to meet our criteria for inclusion. This company is Prevalence of nominee and trust accounts by primary ownership
category.
owned by the widely held Sojitz Corporation (43.92%).
The table presents data for 1,386 publicly traded corporations in 2008,
A non-publicly traded company, ISTS (Thailand) Company including both financial and nonfinancial institutions. ‘‘Average percen-
Ltd. claims 39.53% of Thai Central Chemical’s shares, tage of shares held through nominee/trust account’’ displays the
though, and because we are unable to uncover this proportion of shares held through the two accounts according to the
company’s ownership structure, we exclude Thai Central dominant ownership type for each country. ‘‘Percentage of firms with
nominee/trust holdings 410%’’ indicates the proportion of firms in
Chemical from our data set. which these two accounts are found according to the dominant owner-
We acknowledge that a bias is likely introduced by ship type for each country. ‘‘East Asia nine’’ refers to the average of the
excluding firms whose largest owners hold shares through nine sample countries for each category.
trust accounts, nominee accounts, or holding companies
Country Widely held Widely held Foreign Family State
whose ownership structure we are unable to discern. The
corporation financial state
prevalence of these shareholding practices within each
country in 2008 is reflected in Table 1. Data for 1996 are Average percentage of shares held through nominee/trust account
not available. The top row presents the proportion of the Hong Kong 0.0 3.9 0.0 0.0 0.0
largest two hundred firms that is left out of our sample due Indonesia 2.7 0.0 6.0 1.5 1.1
Japan 7.8 1.4 0.0 1.1 1.6
to one of these transparency issues. This aggregate measure Korea 0.0 0.0 0.0 0.0 0.0
offers the most useful comparison of shareholder transpar- Malaysia 0.0 0.0 6.2 0.4 0.3
ency across countries because it captures the use of both Philippines 8.0 17.3 21.5 23.1 0.0
holding companies and nominee and/or trust accounts as Singapore 0.0 21.4 7.4 10.3 31.3
Taiwan 0.0 0.0 0.0 0.0 0.0
opaque ownership vehicles. The middle row displays the
Thailand 4.1 5.3 7.0 1.6 2.6
proportion of firms for which at least 10% of outstanding East Asia 3.2 5.3 6.8 5.2 4.9
shares are held in nominee and/or trust accounts, and the last nine
row reveals the average percent of voting rights held in Percentage of firms with nominee/trust holdings 4 10%
nominee and/or trust accounts. Hong Kong 0.0 25.0 0.0 0.0 0.0
Table 2 displays the use of nominee and/or trust accounts Indonesia 21.1 0.0 20.0 7.9 5.3
by primary ownership type for firms ultimately included in Japan 30.8 12.5 0.0 6.7 12.5
Korea 0.0 0.0 0.0 0.0 0.0
our sample.3 However, it is not clear which types of owner-
Malaysia 0.0 0.0 16.7 2.4 1.8
ship are being directly concealed through the use of nominee Philippines 42.9 50.0 60.0 60.4 0.0
and/or trust accounts because only the largest owner is Singapore 0.0 60.0 50.0 43.6 82.1
observable. One might conjure up reasons to expect higher Taiwan 0.0 0.0 0.0 0.0 0.0
nominee and/or trust account use in one category over Thailand 33.3 20.0 23.1 9.1 16.7
East Asia 16.8 18.9 24.0 17.1 14.6
another, but no pattern is readily discernable. However, as nine
in Table 2, the Philippines and Singapore clearly rank at the
bottom for transparency measured in this way. Although
data limitations prevent us from exploring further the type of
ownership being concealed through these shareholding
mechanisms, there are strong reasons to believe this struc- nominee accounts. By determining the group affiliation of the
ture is associated with family ownership. problematic firms, they conclude the direction of their bias is
In putting together their earlier data set, Claessens, against uncovering family ownership. Through our reading of
Djankov, and Lang (2000) report the same problem regarding annual reports and stock exchange filings, we can state that,
when the information has been revealed, most nominee
account holders have also been found to be an individual
3
Data inavailability prevents us from producing comparable figures or family. We therefore assume the direction of this bias to be
for the use of private holding companies. the same as that concluded by Claessens, Djankov, and Lang
498 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513
(2000), that is, away from family ownership. Moreover, we
find it intuitive that families and individuals have the largest
incentive to hide their control of a company through the use
of trusts, nominee accounts, and shell holding companies. A
related bias is introduced through our selection criterion
more generally. Widely held corporations are most easily
identifiable, and corporations with outstanding share blocks
greater than our ownership threshold immediately lend
themselves to the possibility of exclusion. Taken together,
these biases suggest our reported incidence of widely held
corporations is likely overstated, with the incidence of
family-ownership being understated.
In addition to ownership structure, we collect informa-
tion on the top executives of firms in our data set. We
gather the names of chief executive officers (CEOs), chair-
men, vice chairmen, managing directors, presidents, pre-
sident directors, and president commissioners using the
Worldscope and OSIRIS databases, annual reports, and
company websites. Firms in different countries relate
different titles to their top executive positions. This
information is gathered for the purpose of checking
whether these executives are affiliated with their firm’s
ultimate owner. As such, we also check Worldscope,
Businessweek, and many annual reports to obtain bio-
graphical employment data for these persons. For the
same purpose, we refer to countless journal articles, case
studies, and news media to build family trees for major
business groups.
To examine changes to the prevalence of crony capit-
alism, we gather data on the political ties of firms that are
predominantly family-owned. To this end we supplement
the above data with the names of board members of
family-owned firms and politicians in both the executive
and legislative branches of government. Names of direc-
tors come from companies’ annual reports from 1996 for
as many firms as reports could be obtained, primarily
from Thomson Research. Directors’ names for 2008 were
obtained from OSIRIS. Names of government officials
were obtained from each respective country’s official
publications. Overall, we investigate the political ties of
515 family-owned firms for 1996 and 638 family-owned
firms for 2008.
Through our effort to track the fate and emergence of
corporations in the data sets of Claessens, Djankov, and
Lang (2000) and ourselves, respectively, we require his-
torical data regarding these firms’ previous and current
ownership structures. These data have been drawn from
the OSIRIS database, as well as individual company
websites. The exercise requires that we also collect
historical data on the incidence of mergers, acquisitions,
bankruptcies, and stock exchange delistings. Such infor-
mation has been gathered from the OSIRIS database,
company websites, online news media, and each coun-
try’s respective stock exchange website. As part of this
analysis, we also require the date of establishment and
market capitalization of each firm. Market capitalization
for the 2008 period was obtained from OSIRIS; for the
1996 period, from Claessens, Djankov, and Lang (2000).
The date of establishment of our corporations was taken
from OSIRIS and supplemented with data from individual
company websites.
2.2. Variables
Much of the focus in our analysis is centered around
ownership type based on control rights. To enable com-
parison with previous findings reported by Claessens,
Djankov and Lang (2000), we group ultimate owners into
the following categories: individual or family, domestic
government, widely held financial institution, widely held
corporation, and foreign government. This last category is
not used by Claessens, Djankov, and Lang (2000), but,
given the distribution of our data, we find it important to
draw the distinction between domestic and foreign
government-owned firms. A number of firms are not
controlled by any group in particular and are thus
designated as widely held. We report a firm to be
ultimately owned if one of the above groups controls a
proportion of outstanding shares exceeding our working
threshold of either 10% or 20%. In many cases, more than
one of the above groups controls a block of shares
exceeding our threshold. When there are two such ulti-
mate owners, we report the subject firm to be half
ultimately owned by each; when there are three such
ultimate owners, we report the subject firm to be one-
third ultimately owned by each (so on and so forth).
The meaning of control rights here is taken to be the
proportion of outstanding shares through which voting
power can be exercised, directly or indirectly, by an
ultimate owner. In keeping with Claessens, Djankov, and
Lang (2000), we report the level of control exercised
through a given ownership channel to be the lowest
shareholding denomination across that chain of owner-
ship. For instance, CJ Home Shopping Co. Ltd., of South
Korea, is owned (40%) by CJ Corporation, which is in turn
owned (43%) by Lee Jae-hyun. We, therefore, report that
CJ Home Shopping is 40% controlled by Lee Jae-hyun (the
smallest stake in the chain of ownership). It is often the
case that a corporation is controlled through more than
one line of ownership. In Indonesia, Surya Dumai Industri
Tbk is 50.47% owned by PT Fangiono Jayaperkasa and
12.63% owned by PT Fangiono Perkasa Sejati. Fangiono
Jayaperkasa is in turn 88.5% owned by the Fangiono
family, and Fangiono Perkasa Sejati is entirely owned by
the family. In such a case we add up the smallest share-
holding denominations across the various channels of
ownership to determine the ultimate level of control.
As a result, we report the Fangiono family controls
63.10% of Surya Dumai Industri Tbk.
In addition to reporting the level of control an ultimate
owner exercises over each firm in our data set, we
calculate the largest owner’s cash flow rights in the
corporation. Cash flow rights differ from control rights
in that they reflect the level of financial stake in a
corporation, not the ability to control it as exercised
through voting rights. These two amounts differ when
an ultimate owner controls a firm through partial own-
ership of an intermediate shareholding company. The
Taiwanese firm Inotera Memories Inc. provides a simple
example in this regard. Qimonda AG holds 35.37% of the
shares in Inotera Memories and is itself owned (78%) by
Infineon Technologies AG (a widely held corporation).
While we report Infineon Technologies to own Inotera
 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513
Memories at 35.37%, its cash flow rights in the firm are
somewhat smaller. In calculating cash flow rights (again,
in keeping with Claessens, Djankov, and Lang, 2000), we
use the product of shareholding stakes across the line of
ownership.4 Infineon Technologies is thus said to exercise
27.59% (35.37% of 78%) of the cash flow rights in Inotera
Memories. In this case the discrepancy between the two
values is not very large, but for many firms in our data set
the cash flow rights of the owner are considerably diluted
due to the presence of multiple intermediate sharehold-
ing firms along the line of ownership.
The separation of cash flow and control rights is an
important part of our analysis as it allows us to under-
stand an important mechanism through which families
and other business groups are able to broaden their
control over publicly listed corporations. We therefore
calculate for each of our publicly traded firms the ratio of
cash flow to control rights to assess the prevalence of this
control mechanism across countries and ownership types.
A problem emerges in the calculation of this ratio, though,
in that we do not have precise figures for the ownership
stakes that exist at certain junctures along the chain of
ownership for some corporations. With the risk of over-
stating the control stake enjoyed by the largest owners of
these corporations, we assume that any uncertain own-
ership stakes take on a value of 100% such that we report
the smallest possible divergence between cash flow and
control rights. This assumption does not raise the
reported level of control, but rather fails to restrict this
value in some cases in which it would be rightful to do so.
To be sure, the level of ultimate control reported is the
lowest shareholding denomination across the line of
ownership, and so this figure is, in any case, less than
100% as a result of the ceilings imposed at other junctures
along this chain. To the benefit of our analysis, this
assumption allows us to be sure that we are reporting
the minimum possible divergence between cash flow and
control rights as the introduction of any ownership
juncture characterized by less than 100% shareholding
has the effect of widening the gap between cash flow and
control rights. In reporting the averages for these ratios
then, we are presenting a somewhat understated preva-
lence of this control mechanism. In many cases, this
approach simply amounts to defining family control as
family group control, as it is often the last link in the
chain of ownership between a group holding company
and the corresponding family whose precise magnitude is
uncertain.
Another control mechanism that we study is the use of
pyramids. Our data on pyramids consist of a dummy
variable that takes the value of one if there exists at least
one publicly traded corporation within the chain of own-
ership (excluding the endpoints) and zero otherwise. That
is, if the largest shareholder holds any portion of its shares
through an intermediate publicly traded firm, we define
this as a pyramid. Cross-holdings, as defined by Claessens,
4
Similar to our approach in calculating control rights, when there
exist multiple channels through which cash flow rights are possessed,
we take the sum of cash flow rights across all lines of ownership to
arrive at our aggregate figure.
499
Djankov, and Lang (2000), are also captured within this
measure. Cross-holding, simply put, is the phenomenon
whereby a firm holds a stake in one of its shareholders.
By and large, little evidence of cross-holding was found in
1996 (Claessens, Djankov, and Lang, 2000), and we find
still less. The average incidence of cross-holding across
our sample firms is 2.6%, with Korea alone exceeding 5%.
For this reason, our final figures do not distinguish
between cross-holding and the use of pyramidal control.
This finding might be attributable to the average firm size
in our sample. Cross-holding within a business group
could take place at a distance from the top of a pyramidal
structure. Because we are looking only at the largest firms
(we do not consider business groups explicitly), many
firms lower in the ownership structure that could have
cross-ownership within their line of control evade our
analysis.
The last measure of control we consider is whether or
not a top member of a corporation’s executive board is
affiliated with its ultimate owner. We perform this test
only for firms held by families, widely held financial
institutions, and widely held corporations. We consider
the following to be top positions in the executive order of
a corporation (where different titles are granted to the top
executives in different countries): CEO, chairman, vice
chairman, managing director, president, president direc-
tor, and president commissioner. In the case of a family-
held firm, the affiliation variable takes a value of one if
any top executive is related, by blood or through mar-
riage, to the controlling family and zero otherwise.5 Under
the remaining two types of ownership, we assign the
value of one to this variable if a top executive is or has
been (in his position immediately preceding his current
position) under the employ of the controlling firm and
zero otherwise.
While the above variables depict an overview of own-
ership and control patterns across countries in 2008 and
enable comparison with those patterns prevailing in
1996, an important part of our analysis involves explain-
ing the changes that have occurred over this time period.
To this end, we trace the evolution of firms included in the
1996 data set to understand how the changes undergone
by these specific firms have contributed to the overall
patterns reflected by the largest publicly traded corpora-
tions in 2008. This is to say, the overall changes in
ownership type (and other measures of control) observed
between 1996 and 2008 stem from changes within many
previously listed corporations that are included in our
data for 1996, but these temporal changes also stem from
the emergence of new corporations over this time period.
In Table 3, we, therefore, construct individual country
profiles to demonstrate the extent to which newly public
and previously listed firms have driven these changes.
The rows located under the ‘‘1996’’ heading for
each country indicate a firm’s ownership type in 1996
5
A family, for example, could wield effective control by maintaining
a majority coalition of directors without owning the largest block of
shares. However, our preliminary findings based on analysis of firms’
boards of directors suggest that such arrangements are relatively
uncommon.
500 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513
according to the Claessens, Djankov, and Lang (2000) data
set. The columns located under the ‘‘2008’’ heading
indicate that same firm’s ownership type in 2008 if it is
still publicly traded and we have been able to uncover its
ownership. If a firm analyzed by Claessens, Djankov, and
Lang (2000) does not appear in our data set (i.e., it was not
one of the largest two hundred publicly traded corpora-
tions in 2008), then the firm is said to be ‘‘not in the 2008
sample,’’ and we provide a breakdown of the reasons for
this. A firm that is still publicly traded in 2008 but was
simply not large enough, in terms of market capitaliza-
tion, to be included in our data set is said to be ‘‘not in the
top two hundred.’’ Firms that have gone bankrupt or have
been delisted for financial reasons since 1996 are cate-
gorized as in ‘‘financial distress.’’ Firms that have been
bought out completely and subsequently delisted by a
private or wholly owned government corporation fall into
either the government or family buyout categories.
Finally, our last category contains firms that have been
bought out and delisted by a publicly traded corporation
on a foreign stock exchange.
Another dimension to the rows located under the ‘‘1996’’
heading is the representation of data on mergers and
acquisitions. For each firm that is still publicly traded in
2008, we indicate whether it has undergone a merger or been
subject to acquisition since 1996. The firms concerned here
are former top 200 firms that have been acquired by, or
merged into, a publicly traded company. Through this con-
struction, the amount of firms that remain publicly traded on
the domestic stock exchange, but as part of another firm, is
indicated in parentheses alongside the total number of firms
in each respective ownership category. It is important to note
these aggregates tally only target firms. That is, they do not
reflect the amount of 2008 publicly traded firms that have
carried out acquisitions. They simply report the number of
1996 top 200 firms that have been subjected to acquisition
(or merger) themselves.
The rows located under the ‘‘2008 firms’’ heading for each
country provide a breakdown of the types of firms included
in our 2008 data set. Included in our 2008 data are firms that
have emerged on the stock exchange since 1996 and firms
that were previously publicly traded. This latter group is not
entirely covered by the data we borrow from Claessens,
Djankov, and Lang (2000), and so the total number of firms in
our 2008 data set that have been public since before 1996 is
larger than the number of firms whose evolution is traced in
the upper portion of these tables. Specifically, the 1996 data
we borrow from Claessens, Djankov, and Lang (2000) fall
short of covering the entire span of listed companies in that
year for two reasons. (1) The authors were able to gather data
for just over half of the listed companies in the region; and
(2) we truncate their data set when appropriate to draw
more valid comparisons across time between the set of
largest companies in a country. Even in the absence of this
shortfall in sample coverage for the 1996 ownership data,
though, our own shortfall in sample coverage for the 2008
ownership data precludes us from being able to trace all
previously publicly-listed firms. The purpose of this bottom
section is simply to exhibit the extent to which changes in
each ownership category are driven by new and old firms,
respectively.
To examine how crony capitalism has changed along-
side the observed patterns of ownership and control, we
employ a measure of business-political ties. In doing so,
we use a methodology similar to that of Faccio (2006).6
We consider a company to be politically connected if one
of the company’s large shareholders is a government
agency or ministry. We also consider a company to be
politically connected if at least one of the company’s
directors is a member of parliament, a minister, the head
of state, or a close relation to any of the above. We define
‘‘close relation’’ as a spouse, a child, a sibling, a parent, or
a close friend. Also in this group we include foreign
politicians and people known to be associated with a
political party or government official.
Cases of friendship are included if they are documen-
ted by reliable sources such as The Economist, Forbes,
Fortune, other scholars (e.g., Faccio, 2006; Johnson and
Mitton, 2003), or prominent journalists (e.g., Studwell,
2007). It is important to note that the cases of friendship
detailed here represent a conservative estimate of the
total number of actual friendships that exist. An example
of a connection known to be closely allied with the
government includes Korea’s chaebols prior to 1997
(Kang, 2002; Haggard, Lim, and Kim, 2003). Well-known
relations with political parties are seen in the UMNO in
Malaysia (Gomez and Jomo, 1997; Gomez, 2001).
Recent work on family-owned firms has also pointed
to the importance of distinguishing between founders and
heirs. Perez-Gonzalez (2006) and Villalonga and Amit
(2006) find negative implications for firm performance
when incoming CEOs are related to the founder using data
from the United States. Bennedsen, Nielsen, Perez-Gonzalez,
and Wolfenson (2007) also find a negative impact on firm
performance from family successions when examining data
from Denmark. It is beyond the scope of this paper to
examine the implications for firm performance from foun-
der versus heir-controlled firms across East Asia, but we do
provide an overview of the prevalence for these firms by
placing each country’s family-owned firms into age-defined
categories. Firms’ ages are defined by the founding date of
the firm for stand-alone firms or by the age of the family-
owned business group. This is done to focus on the like-
lihood that the ultimate family owner is a founder or
an heir.
3. Changes to the control of the largest publicly traded
companies in East Asia
This section reports changes to the concentration of
control across the nine East Asian countries with respect
to five ownership groups in both 1996 and 2008, plus
6
Three caveats are in order. (1) We expand the coverage of firm
affiliates by including all directors instead of only top executives. (2) We
expand the political coverage by including members of Hong Kong’s
Election Committee for 1996 and 2008. (3) We gather political data for
the year 1996, such that the effects of the financial crisis had not yet
occurred (where Faccio’s political data are from 2001). Together, these
methodological differences account for the increased incidence of
political connections we observe for the earlier time period (vis-a -vis
Faccio, 2006).
 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513
foreign state ownership for 2008. We examine ultimate
control at two cutoff levels, 10% and 20% of voting rights.
At the 10% level of ultimate control, family ownership
is the dominant type for both 1996 and 2008. However,
important differences exist across countries and time.
In 1996, widely held ownership was dominant in Japan,
and it was also significant in Korea; state-ownership was
also important in Singapore, Malaysia, and Indonesia. In
2008, widely held ownership remained dominant in Japan
and substantial in Korea, but it also became the most
important type of ownership in Taiwan, and it increased
markedly in Thailand. State-ownership also constituted a
significant form of ownership (above 10% of firms) in
Malaysia, Hong Kong, Singapore, Indonesia, and Thailand,
with the first two exhibiting dramatic increases. Foreign
state ownership is presented only for 2008 because these
data were not available from the 1996 data set. In this
ownership category, Thailand and Indonesia exhibited the
highest levels, though both are below 10%.
At the 20% cutoff level the differences across countries
widen, but the basic patterns remain the same. Family
ownership remains dominant across both time periods,
and moreso in Southeast Asia than in Northeast Asia. The
proportion of widely held firms in Northeast Asia
is substantially higher across both time periods, and it
is also modestly higher among Southeast Asian countries.
The levels of state-owned firms are broadly similar to
those for the 10% threshold of control, with Hong Kong
exhibiting the largest increase, followed by Malaysia, and
Singapore, Indonesia, and Thailand also display significant
levels of state control.
The aggregate figures across East Asia indicate that
family ownership has declined modestly while state own-
ership has increased from 1996 to 2008 for both the 10%
and 20% cutoff levels. Also, widely held ownership has
increased while widely held financial and widely held
corporate ownership has declined.
Because our sample focuses on the largest firms,
ownership changes between 1996 and 2008 could occur
for two reasons; (1) ownership characteristics of firms in
1996 have changed; and (2) new firms in our 2008 sample
could have displaced some of the firms included in our
1996 sample. Table 3 details the specific ownership
changes that have occurred for each firm in our sample
from 1996 at the 10% cutoff level and lists the ownership
characteristics of new firms in our 2008 sample. The data
for Hong Kong reveal that 71 family-dominated firms in
1996 are not included among the top 20 firms in our 2008
sample; of these, 53 were not among the top 20 in terms
of market capitalization, four were delisted due to finan-
cial distress, one became dominated by government own-
ership and is now private, seven were taken private by
families, and six were bought by foreign firms and
delisted. Among those 1996 firms that were among the
largest 200 in 2008, 13 firms with family-dominated
ownership became dominated by state ownership, and
nine firms with widely held financial ownership as well as
nine other firms with widely held nonfinancial corporate
ownership became dominated by family ownership.
In the 2008 sample of firms for Hong Kong 21 new
publicly traded firms were state-dominated in ownership
501
(primarily from mainland China). Thus, the increasing
importance of the state displayed in Table 4 is due to
both the relatively large number of family-dominated
firms from 1996 that became state-owned in 2008 (13),
as well as the large number of newly listed state-owned
firms as of 2008 (21).
The data for Indonesia reveal that a relatively large
number of family-dominated firms from 1996 came under
the control of a foreign state (ten) or were delisted due to
financial distress (12; 11 were due to bankruptcy). The
former category of firms is largely composed of major
Indonesian banks that were taken over and restructured
by the government following the Asian financial crisis (six
banks underwent mergers) and were subsequently
(in 2003) taken over by Singapore (four) and Malaysian
(five) government-owned enterprises. Of the 12 firms’
delistings due to financial distress, the crisis or political
changes associated with it appear to have played a role as
nine occurred in 1998 and 1999. In light of the substantial
changes to the country’s political and economic institu-
tions following the crisis, it is interesting to observe that
family- and state-dominated firms constituted the largest
fraction of publicly listed firms in 2008. Almost no widely
held firms were newly listed as of 2008 (except for a
single firm owned by a widely held nonfinancial
corporation).
The ownership patterns of Japan have remained stable,
although a relatively large number of firms with widely
held financial ownership in 1996 became widely held in
2008 (14).
Since 1996, the largest Korean firms have undergone
some interesting changes that are likely due to the Asian
financial crisis. Notably, a relatively large number of
widely held firms became dominated by family owner-
ship in 2008 (seven), and a large number of family-
dominated firms in 1996 underwent mergers and acquisi-
tions (14). In comparison to other countries that suffered
from the Asian financial crisis, a moderate number of
firms were delisted due to financial distress (eight), with
seven of these occurring between 1997 and 1999. Among
newly listed 2008 firms, most were either family-
dominated or widely held, thereby preserving the dis-
tribution of firms across ownership types from 1996 as
presented in Table 4.
Malaysia is another country that suffered from the Asian
financial crisis. The change of ownership of 19 firms from
family-dominated in 1996 to state-dominated in 2008 sug-
gests that the crisis could have been a precipitating factor.
However, the government’s stake did not exceed the 10%
threshold until after 2002. Likewise, a large number of
family-dominated firms were delisted due to financial dis-
tress (11) although none occurred before 2003. Closer
analysis is necessary to determine whether initial problems
can be traced to the crisis or political motivations that are
independent of the crisis. Newly listed 2008 firms have been
primarily family- or state-dominated, though the shift of
family- to state-owned firms from 1996 has contributed to
the significant increase of state-dominated ownership in
2008, as displayed in Table 4.
The Philippines also suffered from the Asian financial
crisis, though to a lesser degree than Korea, Malaysia,
 502
Table 3
Changes to ownership profiles between 1996 and 2008.
The table presents data for 1,606 publicly traded corporations in 1996 and 1,296 in 2008, including both financial and nonfinancial institutions. Data for 1996 come from Claessens, Djankov, and Lang (2000);
data for 2008 are newly assembled based on Worldscope and supplemented with information from country-specific sources. Data are for the 200 largest publicly traded corporations based on market
capitalization at the end of 2008 for which we could accurately trace ultimate ownership. The upper portion of data for each country traces the movement of firms studied by Claessens, Djankov, and Lang (2000)
across ownership types. Wherever the firm is still publicly listed and we have been able to uncover its ownership type in 2008, we simply plot the firm into the category reflecting its former and latter ownership
type. If a firm analyzed by Claessens, Djankov, and Lang (2000) does not appear in our data set (i.e., it was not one of the largest two hundred publicly traded corporations in 2008), then the firm is said to be ‘‘not
in the 2008 sample,’’ and we provide a breakdown of the reasons for which this has occurred. A firm that is still publicly traded in 2008 but was simply not large enough, in terms of market capitalization, to be
included in our data set is said to be ‘‘not in top two hundred.’’ Firms that have gone bankrupt or have been delisted for financial reasons since 1996 are categorized as ‘‘financial distress.’’ Firms that have been
bought out completely and subsequently delisted by a private or wholly owned government corporation fall into either the government or family buyout categories. Firms could also have been bought out and
delisted by a publicly traded corporation on a foreign stock exchange. For each firm that is still publicly listed in 2008, we indicate whether it has undergone a merger or been subject to an acquisition since 1996.
The number of firms having undergone such transformations within each category is presented in parentheses alongside the total number of firms in that category. The bottom section of data for each country
provides a breakdown of the types of firms included in our 2008 data set. Included in our 2008 data are firms that have emerged on the stock exchange since 1996 and firms that were previously publicly traded.
This latter group is not entirely covered by the data from Claessens, Djankov, and Lang (2000), and so the total number of firms in our 2008 data set that have been public since before 1996 is larger than the

R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513
number of firms whose evolution is traced in the upper portion of data. The purpose of this bottom section is simply to exhibit the extent to which changes in each ownership category are driven by new and old
firms, respectively.

2008 Not in the 2008 sample breakdown

Country Widely Family State Widely held Widely Foreign Not in the 2008 sample Not in top Financial Bought by Bought by Bought by foreign
held financial held state (total) 200 distress government family corporation

Hong Kong
1996
Widely held 0 0 0 0 0 0 0 0 0 0 0 0
Family 3 (1) 37 (4) 13 (1) 4 (1) 0 2 (2) 71 53 (7) 4 1 7 6
State 0 4 (2) 0 1 (1) 0 0 1 0 0 0 0 1
Widely held 0 9 (5) 0 0 1 0 5 2 0 1 1 1
financial
Widely held 1 9 (2) 1 0 0 0 9 3 (3) 0 0 5 1
corporation
2008 firms
Newly listed 2 5 21 1 0 0
Previously listed 8 75 22 3 2 1
Indonesia
1996
Widely held 0 0 0 0 0 0 1 0 0 1 0 0
Family 3 (1) 36 (3) 1 (1) 1 4 10 (3) 50 34 12 2 2 0
State 0 3 (1) 6 0 0 0 4 1 2 1 0 0
Widely held 1 0 0 0 0 0 0 0 0 0 0 0
financial
Widely held 0 1 0 0 4 0 11 7 1 0 1 2
corporation
2008 firms
Newly listed 0 13 9 0 1 2
Previously listed 4 51 7 1 16 7
Japan
1996
Widely held 32 (9) 1 (1) 1 (1) 1 (1) 3 (1) 1 86 79 (12) 4 1 1 1
Family 3 3 (1) 0 0 0 0 5 5 0 0 0 0
State 1 0 3 0 0 0 0 0 0 0 0 0
Widely held 14 (4) 1 1 (1) 0 2 0 7 6 (1) 0 0 1 0
financial
Widely held 0 0 0 0 1 (1) 0 15 15 0 0 0 0
corporation
2008 firms
Newly listed 3 4 3 2 2 0
Previously listed 72 10 5 6 23 1
Korea
1996
Widely held 4 (1) 7 (4) 1 0 0 1 (1) 21 12 (4) 2 5 0 2
Family 2 33 (14) 4 (3) 1 3 (1) 1 (1) 31 23 (4) 6 0 1 1
State 1 0 1 1 1 (1) 0 3 3 0 0 0 0
Widely held 4 (2) 1 2 (1) 0 0 0 2 1 0 0 0 1
financial
Widely held 0 4 (2) 0 0 1 0 12 8 (1) 0 0 4 0
corporation
2008 firms
Newly listed 7 11 2 0 1 1
Previously listed 30 64 9 2 6 1

R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513
Malaysia
1996
Widely held 0 0 0 0 0 0 0 0 0 0 0 0
Family 1 25 (7) 19 (12) 0 4 (1) 1 (1) 83 66 (16) 11 4 2 0
State 0 1 9 (1) 0 0 0 15 12 (2) 1 2 0 0
Widely held 0 0 0 0 0 0 4 3 1 0 0 0
financial
Widely held 0 2 (1) 0 0 0 1 (1) 10 8 (1) 0 1 0 1
corporation
2008 firms
Newly listed 1 23 15 1 1 1
Previously listed 2 50 34 0 5 4
Philippines
1996
Widely held 0 0 0 0 1 0 1 1 0 0 0 0
Family 0 30 (6) 1 0 2 (1) 1 5 4 0 0 1 0
State 0 3 0 0 0 0 0 0 0 0 0 0
Widely held 0 4 (1) 0 0 0 0 2 2 0 0 0 0
financial
Widely held 0 9 (2) 0 0 4 (2) 2 4 2 1 0 0 1
corporation
2008 firms
Newly listed 0 9 1 1 0 0
Previously listed 1 78 4 1 7 5
Singapore
1996
Widely held 1 2 (1) 1 (1) 0 0 0 1 0 0 0 0 1
Family 1 20 (6) 5 (4) 1 0 1 47 37 (4) 1 0 2 7
State 0 10 21 (10) 1 (1) 0 0 16 12 (3) 0 1 0 3
Widely held 0 2 0 0 0 1 (1) 3 1 2 0 0 0
financial
Widely held 0 3 (1) 1 (1) 1 (1) 0 1 11 7 0 0 0 4
corporation
2008 firms
Newly listed 9 29 10 2 2 2
Previously listed 1 46 17 2 1 3
Taiwan
1996
Widely held 0 0 0 1 0 0 4 3 1 0 0 0
Family 8 (1) 7 (2) 0 0 1 0 42 32 7 0 3 0
State 1 0 1 1 0 2 (2) 0 0 0 0 0 0

503
504 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513

Indonesia, and Thailand. But it is interesting to observe

that none of its family-dominated firms was delisted due
Bought by foreign
corporation
to financial distress, and many widely held firms (by
financial or nonfinancial corporations) in 1996 became
2

7
1

2
0

0
family-dominated as of 2008. This heavy orientation
toward family-dominated ownership has been preserved
with 2008 newly listed firms primarily being family-
dominated. Finally, the Philippines has seen very few of
Not in the 2008 sample breakdown

its largest firms leave their perch as the largest publicly

Bought by
family

listed firms in comparison to other East Asian countries.

1
0

0
0
A notable feature of the Singapore data is the relatively
large number of mergers and acquisitions of state-
dominated firms between 1996 and 2008 (10). And in
2008, the family- and state-dominated firms constituted
government
Bought by

the largest share of newly listed firms (29 and 10,

1
0

0
0
0

0
respectively), though widely held firms have clearly
increased with nine new firms in this category.
Taiwan is unusual among the countries examined here
for the clear move away from family-dominated owner-
Financial
distress

ship in 1996 and toward widely held ownership in 2008.

19
5

2
0

This is reflected by the large number of 1996 family firms

that became widely held in 2008 (eight), as well as the
large number of newly listed widely held firms in 2008
Not in top

(26). These two factors, alongside the departure of many

17 (1)

32 (3)
200

3
4

family-dominated firms from our sample of the largest

firms in 2008 (42), can account for the ownership changes
observed in Table 4.
Not in the 2008 sample

Finally, Thailand exhibits interesting results that are

likely related to its role in the Asian financial crisis and
(total)

subsequent political changes. Notably, many were delisted

11

22

61
2

5
4

due to financial distress (19), with 15 firms delisting

between 1997 and 1999, as well as another in 2000 and
another in 2001. A large number of family-owned firms
were also bought out and delisted by foreign companies
(seven). However, these are not clearly attributable to the
Foreign
state

4 (1)

crisis as only two occurred between 1997 and 1999. The

10
2
2

1
0

0
0

crisis and related political changes could have likewise

sparked changes to the large number of family-dominated
Widely

firms that moved to various forms of widely held ownership

4 (1)
held

23
2

3
9
0

0
0

in 2008 (19). However, our further investigations do not

clarify whether the crisis was the specific causal origin. The
diversification of ownership among Thailand’s largest firms
Widely held
financial

has been reinforced by the diversity of ownership types

1 (1)

2 (2)

among newly listed firms in 2008. Thailand and Indonesia

1
3

5
0

0
2008

stand out among the countries examined here for the

relatively large number of firms with foreign state owner-
ship in 2008. For Thailand, we find that the Singapore
State

4 (1)
3 (2)
3
6

7
9
0

government held a substantial ownership stake in 10 firms

and the Malaysia government retained significant owner-
Family

14 (3)

ship stakes in two firms.

37
1

9
9

9
0

In terms of overall foreign state ownership of firms in

our sample, with at least a 10% ownership stake, Singa-
Widely

14 (5)
held

pore has invested in the greatest number at 26 firms (six

26
49

29
2

7
0

in Indonesia, one in Korea, four in Malaysia, five in the

Philippines, ten in Thailand), followed by 12 for Malaysia
Table 3 (continued )

(seven in Indonesia, three in Singapore, two in Thailand),

Previously listed

Previously listed

then China at 11 (one in Indonesia, four in Singapore, and

corporation

corporation
Newly listed

Newly listed
Widely held

Widely held

Widely held

Widely held

Widely held
2008 firms

2008 firms
financial

financial

six in Taiwan), followed by Abu Dhabi in one Singaporean

Thailand
Country

firm, Dubai in one Philippine firm, France in a Japanese

Family
1996

State

firm as well as a Thai firm, India in one Indonesian firm

and one Thai firm, Japan in a Malaysian firm, Norway in a
 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513 505

Table 4
Changes to the control of publicly traded companies in East Asia.
The table presents data for 1,606 publicly traded corporations in 1996 and 1,386 in 2008, including both financial and nonfinancial institutions. Data
for 1996 come from Claessens, Djankov, and Lang (2000); data for 2008 are newly assembled based on Worldscope and supplemented with information
from country-specific sources. Data are for the two hundred largest publicly traded corporations based on market capitalization at the end of 2008 for
which we could accurately trace ultimate ownership.

Country Number of corporations Widely held Family State Widely held financial Widely held corporation Foreign state

Panel A: 10% cutoff

1996
Hong Kong 200 0.0 65.5 4.0 10.5 20.0
Indonesia 178 0.6 68.6 10.2 3.8 16.8
Japan 200 72.5 6.8 2.5 16.5 1.8
Korea 200 26.0 51.8 6.8 4.3 11.3
Malaysia 200 0.5 56.9 19.4 13.1 10.1
Philippines 120 1.7 42.1 3.6 16.8 35.9
Singapore 200 2.5 53.3 21.8 12.0 10.4
Taiwan 141 2.9 65.6 3.0 10.4 18.1
Thailand 167 2.2 56.5 7.5 12.8 21.1

East Asia nine 1,606 13.3 51.6 9.2 10.9 15.0

2008
Hong Kong 158 6.3 60.6 28.0 3.5 0.9 0.6
Indonesia 132 3.8 57.3 14.1 3.6 13.4 7.8
Japan 136 57.4 9.6 6.3 6.6 19.1 1.1
Korea 159 28.9 54.5 6.9 2.7 6.0 0.9
Malaysia 154 2.6 51.5 39.7 1.4 2.2 2.6
Philippines 114 3.5 78.5 5.2 3.3 6.1 3.4
Singapore 131 8.4 60.2 20.5 3.8 1.7 5.3
Taiwan 163 57.1 13.8 9.2 2.5 17.5 0.0
Thailand 149 30.9 37.8 12.8 3.4 6.7 8.5

East Asia nine 1,296 22.9 46.1 16.2 3.4 8.2 3.3

Change
Hong Kong 6.3  4.9 24.0  7.0  19.1
Indonesia 3.2  11.3 3.9  0.2  3.4
Japan  15.1 2.8 3.8  9.9 17.3
Korea 2.9 2.8 0.2  1.5  5.3
Malaysia 2.1  5.4 20.3  11.7  7.9
Philippines 1.8 36.4 1.6  13.5  29.8
Singapore 5.9 6.9  1.3  8.2  8.7
Taiwan 54.2  51.8 6.2  7.9  0.6
Thailand 28.7  18.7 5.3  9.4  14.4

East Asia nine 9.6  5.5 7.0  7.6  6.8

Panel B: 20% cutoff

1996
Hong Kong 200 7.0 68.3 0.5 7.8 16.5
Indonesia 178 5.1 71.5 8.2 2.0 13.2
Japan 200 91.5 4.0 1.5 1.5 1.5
Korea 200 64.0 26.3 2.8 0.3 6.8
Malaysia 200 13.0 64.0 14.3 2.8 6.0
Philippines 120 19.2 44.6 2.1 7.5 26.7
Singapore 200 6.5 52.5 27.0 4.0 10.0
Taiwan 141 26.2 48.2 2.8 5.3 17.4
Thailand 167 6.6 61.6 8.0 8.6 15.3

East Asia nine 1,606 27.7 48.7 7.9 4.2 11.7

2008
Hong Kong 167 12.0 55.1 27.2 3.3 2.4 0.0
Indonesia 137 13.1 50.0 13.5 2.2 13.3 7.8
Japan 176 72.2 6.0 4.5 2.3 14.5 0.6
Korea 172 48.3 35.8 5.5 0.0 10.2 0.3
Malaysia 159 13.2 44.7 33.5 0.6 4.3 3.7
Philippines 118 7.6 76.5 3.4 1.9 5.9 4.7
Singapore 135 18.5 51.9 19.6 1.7 3.9 4.3
Taiwan 169 75.1 4.7 6.5 1.2 12.4 0.0
Thailand 153 38.6 33.3 12.1 2.3 7.8 5.9

East Asia nine 1,386 35.3 37.7 14.0 1.7 8.5 2.8

Change
Hong Kong 5.0  13.2 26.7  4.5  14.1
506 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513

Table 4 (continued )

Country Number of corporations Widely held Family State Widely held financial Widely held corporation Foreign state

Indonesia 8.0  21.5 5.3 0.2 0.1

Japan  19.3 2.0 3.0 0.8 13.0
Korea  15.7 9.5 2.7  0.3 3.4
Malaysia 0.2  19.3 19.2  2.2  1.7
Philippines  11.6 31.9 1.3  5.6  20.8
Singapore 12.0  0.6  7.4  2.3  6.1
Taiwan 48.9  43.5 3.7  4.1  5.0
Thailand 32.0  28.3 4.1  6.3  7.5

East Asia nine 7.6  11.0 6.2  2.5  3.2

Malaysian firm, Qatar in a Singaporean firm, Saudi Arabia Table 5

in a Japanese firm and a Korean firm, South Africa in a Changes to the concentration of family control.
The table presents data for 1,606 publicly traded corporations in 1996
Singaporean firm, Taipei City in a Hong Kong firm, Taiwan
and 1,296 in 2008, including both financial and nonfinancial institutions.
in a Malaysian firm, Thailand in a Singaporean firm, the Data for 1996 come from Claessens, Djankov, and Lang (2000); data for
UK in a Singaporean firm, and the United States in an 2008 are newly assembled based on Worldscope and supplemented with
Indonesian firm. information from country-specific sources. Data are for the 200 largest
publicly traded corporations based on market capitalization at the end of
2008 for which we could accurately trace ultimate ownership. ‘‘East Asia
4. Changing characteristics of family owned firms and nine’’ refers to the average of the nine sample countries for each category.
their political ties
Percentage of sample firms that
We examine three sets of indicators regarding firms families control
with a dominant family owner: (1) the concentration of
Country Average number Top Top five Top 10 Number
corporate ownership in the hands of families, in Table 5; of firms per one families families of firms
(2) the prevalence of founders versus heirs, in Table 6; family family
and (3) the incidence of political ties among family-
owned firms, in Table 7. With respect to the concentration 1996
Hong Kong 1.92 8.0 30.0 39.0 200
of family ownership, the first column in Table 5 indicates 1.55 4.5 18.0 29.2 178
Indonesia
that Korea has exhibited the largest increase in the Japan 1.00 0.5 2.5 5.0 200
average number of the nation’s largest firms that are in Korea 1.61 5.0 16.0 23.5 200
the hands of a single family. Most other countries have Malaysia 1.75 10.5 29.0 37.0 200
Philippines 2.42 6.7 25.0 39.2 120
seen declines that are consistent with the expectations
Singapore 1.23 3.0 10.0 14.5 200
governing a growing economy with increasing numbers of Taiwan 1.08 3.5 7.8 11.3 141
publicly listed firms. Thailand 1.67 7.8 24.0 33.5 167
The tables indicate the percentage of sample firms that 1.58 5.49 18.02 25.8
East Asia
the top one, five, or 10 families control. When looking nine
across East Asia from 1996 to 2008 there has been a 2008
modest decline in the percentage of firms controlled by Hong Kong 1.33 3.2 11.4 17.7 158
the largest families. But these numbers mask considerable Indonesia 1.49 4.5 18.9 26.5 132
Japan 1.07 1.5 4.4 8.1 136
variation across individual countries. The percentage of
Korea 3.22 10.1 37.5 42.8 159
the largest publicly listed firms in the hands of the top Malaysia 1.49 5.2 16.4 23.4 154
family has increased the most for Korea (more than Philippines 1.69 5.3 16.9 36.0 114
doubling from 5% to 10.1%), while most other countries Singapore 1.16 3.8 12.2 16.0 131
Taiwan 1.24 1.2 5.5 8.6 163
have seen declines, with Malaysia exhibiting the biggest
Thailand 1.53 4.7 13.4 19.5 149
reduction, followed by Hong Kong, Thailand, Taiwan, and
East Asia 1.58 4.38 15.18 22.05
the Philippines.
nine
Mirroring the concentration of control by a single Change
family, the concentration of control in the hands of the Hong Kong  0.59  4.84  18.61  21.28
10 largest families for 1996 is highest for Hong Kong, Indonesia  0.06 0.05 0.96  2.70
Indonesia, Malaysia, the Philippines, and Thailand. But, in Japan 0.07 0.97 1.91 3.09
Korea 1.61 5.06 21.50 19.27
2008, Hong Kong, Malaysia, and Thailand experienced  0.26  5.31  12.65  13.62
Malaysia
significant declines. The results for these three countries Philippines  0.74  1.40  8.12  3.20
are consistent with the growing role of the state as well as Singapore  0.06 0.82 2.21 1.53
an increase in widely held ownership for Thailand as seen Taiwan 0.15  2.32  2.28  2.76
Thailand  0.14  3.09  10.53  14.07
in Tables 3 and 4. Korea again bucks the trend by
East Asia 0.00  1.12  2.84  3.75
displaying a substantial increase. The share of the largest
nine
firms controlled by the top 10 families for Korea in 2008 is
 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513 507

Table 6
Years of ownership of family-owned firms.
The table presents data for publicly traded corporations in 1996 and in 2008, including both financial and nonfinancial institutions. Data for 1996 come
from Claessens, Djankov, and Lang (2000); data for 2008 are newly assembled based on Worldscope and supplemented with information from country-
specific sources. Data are for firms in which a family is the dominant owner. ‘‘Years of family ownership’’ indicates the number of years that a family has
owned a firm or the group to which the firm belongs. Firms are from the 200 largest publicly traded corporations based on market capitalization at the
end of 2008 for which we could accurately trace ultimate ownership. ‘‘East Asia nine’’ refers to the average of the nine sample countries for each category
except the first.

Years of family ownership (percentage of firms)

Country Number of firms Z 75 50–74 25–49 10–24 o 10 Percentage of Mean age Median age Standard deviation
firmsZ 25 years

1996
Hong Kong 156 6 6 42 37 10 54 30.9 26 21.9
Indonesia 137 2 1 32 59 5 36 24.6 22 16.6
Japan 10 40 20 30 0 10 90 54.6 59 34.6
Korea 153 0 10 64 26 0 74 34.4 35 12.9
Malaysia 125 6 9 34 41 10 49 29.2 24 20.1
Philippines 50 6 14 38 20 22 58 31.7 29.5 22.4
Singapore 110 5 4 35 54 3 44 27.9 23 18.5
Taiwan 83 0 0 55 41 4 55 26.3 28 9.8
Thailand 122 2 2 27 52 17 31 20.5 15.5 14.8

East Asia nine 946 7.44 7.33 39.67 36.67 9.00 54.56 31.12 29.11 19.07

2008
Hong Kong 90 46 10 31 8 6 87 67.5 56 38.7
Indonesia 74 7 16 51 22 4 74 36.8 31.5 23.5
Japan 15 27 27 27 20 0 80 53.6 56 32.3
Korea 86 0 43 47 5 6 90 44.7 46 14.1
Malaysia 79 6 3 52 25 14 61 31.7 32 22.7
Philippines 85 15 14 39 27 5 68 41.5 39 24.8
Singapore 78 5 3 54 19 19 62 29.8 29 20.7
Taiwan 20 0 5 55 35 5 60 28.3 25 13.3
Thailand 53 4 6 43 43 4 53 30 25 19.1

East Asia nine 580 12.22 14.11 44.33 22.67 7.00 70.56 40.43 37.72 23.24

Change
Hong Kong 40 4  11  29 4 33 36.6 30 16.8
Indonesia 5 15 19  37 1 38 12.2 9.5 6.9
Japan  13 7 3 20  10  10 1 3  2.3
Korea 0 33  17  21 6 16 10.3 11 1.2
Malaysia 0 6 18  16 4 12 2.5 8 2.6
Philippines 9 0 1 7  17 10 9.8 9.5 2.4
Singapore 0 1 19  35 16 18 1.9 6 2.2
Taiwan 0 5 0 6 1 5 2 3 3.5
Thailand 2 4 16 9  13 22 9.5 9.5 4.3

East Asia nine 4.78 6.78 4.67  14 2 16 9.31 8.61 4.18

higher than for any other country in either time period
examined.
Another point of interest regarding family-owned
firms is whether they are controlled by the founder or
an heir. Table 6 reports that more than half of all family-
owned firms were at least 25 years old for five of the nine
countries in 1996. In 2008, more than half of all family-
owned firms in each country were at least 25 years old for
every country in our sample. Insofar as firm age corre-
sponds to a greater likelihood that an heir will take over
from the founder, the proportion of all family-owned
firms with heirs at the helm clearly has increased for
every country in our sample except Japan.
Table 7 displays our analysis of the political ties of 515
family-owned firms for 1996 and 638 family-owned firms
for 2008. We find that 44% of family-owned firms exhibit
political links in 1996 while only 12.4% exhibit political
links in 2008. In 1996, 13% of connections involve state
ownership and 34.1% involve politically connected direc-
tors. The numbers add up to over 44% because some firms
exhibit both types of connections. In 2008, 4.8% of con-
nections involve state ownership while 8.4% involve
politically connected directors.
Concerning changes across time and across countries, a
substantial decline is evident for connections involving
directors as well as connections involving state owner-
ship. Individual countries display varying levels of decline,
however. The most dramatic reductions are observed for
Korea, Singapore, Indonesia, and Thailand. Korea’s dra-
matic fall is due to the public backlash against the
political ties of the chaebols in the wake of the Asian
financial crisis. Singapore’s large decline is attributable to
the reduction in the number of publicly traded family-
owned firms in which the state has an ownership stake.
Many of these firms were no longer publicly listed in
2008, and for many others it became impossible to
508 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513

Table 7 Table 8
Country distribution of family-owned firms with political connections. Changes to the means of enhancing control in East Asian corporations.
‘‘Number of family-owned firms’’ is the number of firms for which a The table presents data for 1,606 publicly traded corporations in 1996
list of directors could be obtained. ‘‘Percentage of family-owned firms and 1,386 in 2008, including both financial and nonfinancial institutions.
with political ties’’ indicates the number of firms in which the state is a Data for 1996 come from Claessens, Djankov, and Lang (2000); data for
significant shareholder (controlling at least 10% of the voting stock) or 2008 are newly assembled based on Worldscope and supplemented
the director is politically connected as indicated by the subsequent two with information from country-specific sources. Data are for the 200
columns. The latter two columns can sum to a number greater than the largest publicly traded corporations based on market capitalization at
‘‘Percentage of family-owned firms with political ties’’ column because the end of 2008 for which we could accurately trace ultimate ownership.
some firms display both types of political ties. ‘‘East Asia nine’’ refers to ‘‘Pyramids with ultimate owners’’ (when companies are not widely held)
the average of the nine sample countries for each category except equals one if the controlling owner exercises control through at least
the first. one publicly traded company and zero otherwise; ‘‘Controlling owner
alone’’ equals one if there does not exist a second owner who holds at
Country Number Percentage Percentage of Percentage of least 10% of the stock and zero otherwise; and ‘‘Management’’ equals
of of family- family-owned family-owned one if the chief executive officer, board chairman, or vice chairman is
family- owned firms with the firms with from the controlling family and zero otherwise. ‘‘East Asia nine’’ refers to
owned firms with state as a politically the average of the nine sample countries for each category.
firms political ties significant connected
shareholder directors Country Pyramids with Controlling Management
ultimate owners owner alone
1996
Hong Kong 96 38 3 35 1996
Indonesia 73 59 10 52 Hong Kong 23.7 69.4 44.3
Japan 11 0 0 0 Indonesia 66.9 51.8 84.6
Korea 61 69 20 67 Japan 29.4 88.2 57.1
Malaysia 75 45 27 29 Korea 36.1 75.0 77.6
Philippines 36 28 11 31 Malaysia 38.5 37.9 94.6
Singapore 40 63 22 33 Philippines 40.2 36.8 42.3
Taiwan 56 13 2 11 Singapore 68.2 30.1 88.3
Thailand 67 45 22 49 Taiwan 49.0 45.9 79.8
Thailand 12.7 8.5 67.5
East Asia
515 44 13 34.1
nine East Asia 40.9 43.6 70.4
nine
2008
Hong Kong 100 35 4 38 2008
Indonesia 78 8 0 8 Hong Kong 21.1 74.1 82.4
Japan 15 7 6 0 Indonesia 32.8 68.1 58.2
Korea 78 3 3 0 Japan 26.5 79.2 72.5
Malaysia 86 22 12 10 Korea 50.6 94.0 68.4
Philippines 113 15 5 10 Malaysia 26.1 76.3 70.9
Singapore 80 9 1 9 Philippines 44.0 66.4 71.0
Taiwan 21 0 0 0 Singapore 22.7 75.9 74.0
Thailand 67 13 12 1 Taiwan 16.7 81.8 78.1
Thailand 35.1 65.9 65.2
East Asia
nine 638 12.4 4.8 8.4 East Asia 30.9 86.1 70.9
nine
Change
Hong Kong 3 1 3 Change
Indonesia  51  10  44 Hong Kong  2.6 4.7 38.1
Japan 7 6 0 Indonesia  34.1 16.3  26.4
Korea  66  17  67 Japan  2.9  9.0 15.4
Malaysia  23  15  19 Korea 14.5 19.0  9.2
Philippines  13 6  21 Malaysia  12.4 38.4  23.7
Singapore  54  21  24 Philippines 3.8 29.5 28.7
Taiwan  13 2  11 Singapore  45.5 45.8  14.3
Thailand  31  10  48 Taiwan  32.3 35.9  1.7
Thailand 22.4 57.4  2.3
East Asia
 27.4  8.2  25.7 East Asia
nine  10.0 42.5 0.5
nine

accurately trace ultimate ownership. Indonesia’s pro-

portion of politically linked firms also fell due to the end
of Suharto’s regime in 1998. Finally, the proportion of
Thai firms with political connections has fallen due to
the dramatic political changes that have occurred
since 1997.
Overall, the findings suggest that the incidence of
crony capitalism has fallen across much of East Asia,
especially in those countries that experienced a political
backlash due to the financial crisis. However, it should
also be noted that political connections could simply have
changed from more overt forms to more opaque mechan-
isms, such as those shown in Tables 1 and 2.
5. Means of enhancing control
Table 8 reports data for the means by which ultimate
owners enhance their control of East Asian corporations.
With respect to pyramid structures, we find that their
importance has declined among nations’ largest firms
from 1996 to 2008, with the largest declines occurring
 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513
in Singapore (  45.4%), Indonesia (  34.1%), and Taiwan
(  32.3%). Their use has increased the most in Korea
(11.4%) and Thailand (22.4%). In 2008, the lowest use of
pyramids occurred in Taiwan (16.7%), followed by Hong
Kong (21.1%), while Korea and the Philippines exhibit the
highest use (50.6% and 44%, respectively).
We also study changes to two additional means that
strengthen ultimate control but are not used in the calcula-
tions of the separation between ownership and control
examined below. The first is the possibility of being the only
controlling owner, with a second controlling owner defined
as somebody with at least 10% of the voting rights. The idea
is that if such a second party exists, it could be more difficult
for the first owner to control the board of directors. However,
a large owner who controls more than half of the votes is
classified as the single controller. The data show a large
increase (from 48.2% to 86.1%) in the sample of 2008
companies that are not widely held to have single ultimate
owners as compared with those in 1996. For 2008, this share
is highest in Korea (94%), followed by Taiwan (81.8%). Japan
is the only country to exhibit a decline, albeit from a very
high starting point.
Finally, we examine the change in the separation of
control and management by investigating whether a mem-
ber of the controlling family or an employee of the control-
ling widely held financial institution or corporation is the
CEO, chairman, honorary chairman, or vice chairman of the
company. Across both times, the correspondence between
control and management has remained high, although some
have exhibited large increases or declines. Hong Kong, Japan,
and the Philippines have seen the largest increases in the
correspondence between control and management among
their largest firms (all greater than 15%), while Indonesia and
Malaysia have displayed the largest decreases, yet still
remain very high (both above 58%).
6. Changes to the separation of ownership and control
Table 9 reports descriptive statistics on the separation
of ultimate cash flow and control rights in the hands of
the largest controlling holder in which the largest control
holder has at least 10% of the vote. Panel A demonstrates
that there has been an overall increase in the concentra-
tion of cash flow rights from 1996 to 2008, from 24.89% to
37.86%. Indonesia, Japan, and the Philippines exhibit
increases greater than 20%, followed by Hong Kong and
then Singapore. Thailand is the only country to exhibit a
negative, albeit very small, change. As a result of these
changes, Thailand no longer exhibits the highest level of
concentration of cash flow rights in 2008 as it did in 1996.
Indonesia, the Philippines, Hong Kong, and Singapore all
display higher levels of cash flow rights. Taiwan and
Korea have the lowest levels of concentrated cash flow
rights, though they are about 5% higher than in 1996.
A quarter of Indonesian companies have more than 69% of
the cash flow rights in the hands of the largest bloc-
kholder, while a quarter of Korean and Taiwanese com-
panies have less than 13% of the cash flow rights in the
hands of the largest blockholder.
Changes to the concentration of control rights in the
hands of the largest blockholder exhibit a similar pattern
509
as displayed in Panel B. Across all countries in the sample
there is an increase of 14.03% from 1996 to 2008. With
respect to individual states, the Philippines, Hong Kong,
Indonesia, and Japan exhibit the largest increases ranging
from 17.85% for Indonesia to 26.93% for the Philippines.
The smallest increases occur in Taiwan and Thailand, at
2.62% and 3.67%, respectively. Likewise, the ordering of
countries with respect to the concentration of voting
rights in 2008 has changed. Whereas Thailand was the
highest in 1996, it is lower than the Philippines, Indone-
sia, Hong Kong, and Singapore in 2008. Korea and Taiwan
exhibit the lowest levels of concentration of control
rights, at 29.58% and 26.98%, respectively.
Panel C shows the ratio of cash flow to control rights.
The separation of ownership and control across all coun-
tries is nearly the same at both times though changes
have occurred for individual countries. Thailand displays
the largest increase in the separation of ownership and
control, followed by Korea. The largest decline in the
separation of ownership and control has occurred in
Japan. In 2008, Japan displays the lowest separation of
ownership and control, where the typical large control
holder has ten ultimate votes for 9.2 direct shares held.
In contrast, Korea displays the greatest separation, where
the typical large control holder has ten ultimate votes for
each 7.8 shares held. We further examine whether the
separation of ownership and control varies significantly
by type of owner in Table 10.
In Table 10, we study changes to the level of control
exercised by four types of controlling shareholders from
1996 to 2008, and we also examine the control of foreign
states in 2008 exclusively when control is defined at the
10% cutoff, the same as for Table 8. In 1996, family
ownership displays the most separation of ownership
and control, on average, of all the ownership categories.
In 2008, the separation of ownership and control is
greatest for family-controlled firms only for Korea and
Malaysia. Hong Kong, Indonesia, Japan, the Philippines,
Singapore, Taiwan, and Thailand all display greater levels
of separation between ownership and control for other
ownership types—the state for Japan and Thailand, and
widely held financial firms for Hong Kong, Indonesia, the
Philippines, Singapore, and Taiwan.
In summary, the separation of ownership and control
for family-controlled firms has remained nearly the same
between 1996 and 2008 when looking at the average
across all East Asian states, though considerable variance.
The biggest changes, on average, have occurred among
the other ownership types in which exists the separation
of ownership and control has increased the most for state-
owned firms followed by firms in which the dominant
owner is a widely held financial corporation. Finally, it is
interesting to note that, on average, the greatest levels of
separation of ownership and control in 2008 occur among
firms with a foreign state as the dominant owner.
7. Political transformation and ownership changes
Regardless of whether a country suffered a heavy blow
from the Asian financial crisis, significant changes to the
prevailing forms of corporate ownership have emerged
510 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513

Table 9
Changes to the separation of cash flow and voting rights in East Asian corporations.
The table presents data for 1,398 publicly traded corporations in 1996 and 999 publicly traded corporations in 2008, including both financial and
nonfinancial institutions. Data for 1996 come from Claessens, Djankov, and Lang (2000); data for 2008 are newly assembled based on Worldscope and
supplemented with information from country-specific sources. Data are for the 200 largest publicly traded corporations based on market capitalization at
the end of 2008 for which we could accurately trace ultimate ownership. The sample is smaller than the previous sample (1,606 in 1996 and 1,386 in
2008) as 208 firms for 1996 and 297 firms for 2008 do not have any owner that control more than 10% of the voting rights. ‘‘East Asia nine’’ refers to the
average of the nine sample countries for each category except the first.

Panel A: Cash flow rights

Country Number of corporations Mean Standard deviation Median First quartile Third quartile

1996
Hong Kong 200 26.30 10.67 26.00 21.00 32.00
Indonesia 177 27.71 13.23 26.00 17.00 35.00
Japan 55 13.94 14.14 10.00 4.00 20.00
Korea 154 18.67 9.70 16.00 12.00 24.00
Malaysia 199 25.52 12.48 24.00 14.00 33.00
Philippines 117 25.18 12.16 23.00 15.00 33.00
Singapore 197 21.48 10.36 20.00 14.00 30.00
Taiwan 135 20.21 10.30 21.00 12.00 24.00
Thailand 164 36.58 13.25 36.00 26.00 47.25

East Asia nine 1398 24.89 12.93 24.00 15.00 32.25

2008
Hong Kong 148 45.00 21.78 42.85 28.08 59.63
Indonesia 127 48.69 26.79 51.53 23.09 69.92
Japan 58 34.18 24.75 26.13 16.29 48.45
Korea 113 23.53 16.46 18.37 12.57 31.00
Malaysia 150 35.43 20.25 31.07 19.05 51.05
Philippines 110 47.15 26.73 43.06 25.11 67.29
Singapore 120 36.94 21.58 34.53 18.82 53.47
Taiwan 70 25.06 17.73 20.37 12.82 35.48
Thailand 103 35.49 22.02 30.80 18.81 51.94
East Asia nine 999 37.86 23.77 32.88 18.03 53.88
Change
Hong Kong 18.70 11.11 16.85 7.08 27.63
Indonesia 20.98 13.56 25.53 6.09 34.92
Japan 20.24 10.61 16.13 12.29 28.45
Korea 4.86 6.76 2.37 0.57 7.00
Malaysia 9.91 7.77 7.07 5.05 18.05
Philippines 21.97 14.57 20.06 10.11 34.29
Singapore 15.46 11.22 14.53 4.82 23.47
Taiwan 4.85 7.43  0.63 0.82 11.48
Thailand  1.09 8.77  5.20  7.19 4.69

East Asia nine 12.97 10.84 8.88 3.03 21.63

Panel B: Voting rights

1996
Hong Kong 200 29.84 10.05 26.50 22.00 33.25
Indonesia 177 36.70 11.66 36.00 30.44 44.00
Japan 55 17.56 12.46 10.00 10.00 20.00
Korea 154 21.35 9.47 19.00 14.00 25.00
Malaysia 199 30.54 11.41 31.00 22.00 35.50
Philippines 117 28.42 11.59 26.00 21.00 34.00
Singapore 197 28.85 9.14 30.00 22.00 34.00
Taiwan 135 24.36 9.58 23.00 16.00 31.00
Thailand 164 39.04 12.74 42.00 30.00 51.00

East Asia nine 1398 29.70 12.26 28.00 22.00 36.00

2008
Hong Kong 148 49.63 19.32 50.06 35.41 63.15
Indonesia 127 54.55 23.31 52.13 40.25 70.91
Japan 58 36.63 23.82 30.80 20.14 49.89
Korea 113 29.58 14.94 26.22 18.06 36.00
Malaysia 150 42.51 18.57 41.70 29.00 55.96
Philippines 110 55.35 22.74 52.62 38.38 73.45
Singapore 120 43.24 18.92 43.16 25.87 56.73
Taiwan 70 26.98 16.50 22.74 15.10 35.48
Thailand 103 42.71 19.60 43.90 28.46 54.66
 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513 511

Table 9 (continued )

Panel A: Cash flow rights

Country Number of corporations Mean Standard deviation Median First quartile Third quartile

East Asia nine 999 43.73 21.76 41.50 25.85 57.46

Change
Hong Kong 19.79 9.27 23.56 13.41 29.90
Indonesia 17.85 11.65 16.13 9.81 26.91
Japan 19.07 11.36 20.80 10.14 29.89
Korea 8.23 5.47 7.22 4.06 11.00
Malaysia 11.97 7.16 10.70 7.00 20.46
Philippines 26.93 11.15 26.62 17.38 39.45
Singapore 14.39 9.78 13.16 3.87 22.73
Taiwan 2.62 6.92  0.26  0.90 4.48
Thailand 3.67 6.86 1.90  1.54 3.66

East Asia nine 14.03 9.50 13.50 3.85 21.46

Panel C: Ratio of cash flow rights to voting rights

1996
Hong Kong 200 0.89 0.21 1.00 1.00 1.00
Indonesia 177 0.76 0.25 0.81 0.59 1.00
Japan 55 0.71 0.35 1.00 0.38 1.00
Korea 154 0.88 0.22 1.00 0.87 1.00
Malaysia 199 0.84 0.23 1.00 0.67 1.00
Philippines 117 0.88 0.20 1.00 0.81 1.00
Singapore 197 0.73 0.22 0.73 0.57 1.00
Taiwan 135 0.82 0.23 1.00 0.64 1.00
Thailand 164 0.94 0.16 1.00 1.00 1.00
East Asia nine 1398 0.83 0.24 1.00 0.67 1.00
2008
Hong Kong 148 0.89 0.20 1.00 0.83 1.00
Indonesia 127 0.85 0.24 1.00 0.73 1.00
Japan 58 0.92 0.17 1.00 1.00 1.00
Korea 113 0.79 0.30 1.00 0.59 1.00
Malaysia 150 0.81 0.27 1.00 0.63 1.00
Philippines 110 0.83 0.25 1.00 0.68 1.00
Singapore 120 0.82 0.27 1.00 0.68 1.00
Taiwan 70 0.90 0.24 1.00 1.00 1.00
Thailand 103 0.82 0.28 1.00 0.66 1.00
East Asia nine 999 0.84 0.26 1.00 0.70 1.00
Change
Hong Kong 0.00  0.01 0.00  0.17 0.00
Indonesia 0.09  0.01 0.19 0.15 0.00
Japan 0.21  0.18 0.00 0.63 0.00
Korea  0.10 0.08 0.00  0.28 0.00
Malaysia  0.02 0.04 0.00  0.04 0.00
Philippines  0.05 0.05 0.00  0.13 0.00
Singapore 0.09 0.04 0.27 0.11 0.00
Taiwan 0.09 0.01 0.00 0.37 0.00
Thailand  0.13 0.12 0.00  0.35 0.00

East Asia nine 0.01 0.02 0.00 0.03 0.00

only when dramatic changes to the political system also
occurred. Where political change did not happen, owner-
ship patterns tended to reinforce the status quo arrange-
ments. As displayed in Table 11, important political
changes occurred in several countries at the end of the
1990s, including Hong Kong, Indonesia, Taiwan, and Thai-
land. In each of these countries, ownership shifted in a
new direction. In Hong Kong, the handover to China on
July 1, 1997, corresponds to a dramatic increase in the
prevalence of state ownership as displayed in Table 4.
In Indonesia, Suharto’s regime came to an end in 1998 and
a new constitution was drafted that moved the country in
a democratizing direction which corresponds to a decline
in family ownership. The decline is dramatic at the 20%
cutoff level as displayed in Table 4, Panel B. In Taiwan, the
55-year reign of Kuomintang (KMT) came to an end in
2000, opening the way for Chen Shui-bian and his Demo-
cratic Progressive Party to run the country. He has been
applauded for breaking up the age-old ties between the
old ruling KMT party and companies in Taiwan (CLSA
Emerging Markets, 2001). In Thailand, the 1997 constitu-
tion was the country’s first to be drafted by a popularly
elected Constitutional Drafting Assembly; it has been
called the ‘‘People’s Constitution.’’ The constitution cre-
ated a bicameral legislature and for the first time in Thai
history both houses were directly elected. These changes
512 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513

Table 10 forms of widely held ownership as seen in Table 4. Korea

Changes to the separation of ownership and control across type of the is one of the most interesting cases because it faced tremen-
largest controlling shareholder.
dous pressures to reform its corporate governance practices
The table presents data for 1,606 publicly traded corporations in 1996
and 1,296 in 2008, including both financial and nonfinancial institutions. in the wake of the 1997 financial crisis. Although 1997
Data for 1996 come from Claessens, Djankov, and Lang (2000); data for marked the first transfer of the government between parties
2008 are newly assembled based on Worldscope and supplemented by peaceful means – from Kim Young-sam to Kim Dae-jung –
with information from country-specific sources. Data are for the 200 the country did not experience any major domestic political
largest publicly traded corporations based on market capitalization at
the end of 2008 for which we could accurately trace ultimate ownership.
changes in terms of fundamentally new institutions or shifts
Controlling shareholders are defined at the 10% cutoff level. Widely held of power away from a long-dominant party to a new political
firms are excluded from the sample. The reported numbers represent the party, as in Taiwan. This relative lack of political change
mean ratio of cash flow over control rights. n.a. means that no firms fit corresponds to the persistence of prevailing forms of corpo-
this category. ‘‘East Asia nine’’ refers to the average of the nine sample
rate ownership between the two periods of time with family
countries for each category.
ownership being the most common followed by widely held
Country Family State Widely Widely held Foreign ownership. Malaysia is another interesting case in that it also
held corporation state suffered some of the worst effects of the financial crisis, yet
financial the political regime remained intact with Mahathir
Mohamed successfully riding out the crisis and voluntarily
1996
Hong Kong 0.860 1.000 0.884 0.981 passing on the political reins to his favored successor,
Indonesia 0.666 0.955 1.000 0.984 Abdullah Ahmad Badawi, in 2003. Under Mahathir’s leader-
Japan 0.974 1.000 0.531 1.000 ship from 1981 to 2003, Malaysia’s political system became
Korea 0.861 0.981 0.873 0.949
increasingly centralized and authoritarian, which corre-
Malaysia 0.791 0.973 1.000 0.954
Philippines 0.821 0.948 0.938 0.961 sponds to the high levels of state ownership in 1996 and
Singapore 0.712 0.690 0.923 0.935 the even higher levels of state ownership in 2008 (a 100%
Taiwan 0.755 1.000 0.901 0.885 increase). The Philippines also faced substantial problems in
Thailand 0.923 0.990 1.000 1.000 the wake of the Asian financial crisis, but its problems were
East Asia 0.818 0.948 0.894 0.961 not as severe as those of Thailand, Korea, Indonesia, or
nine Malaysia. While the presidency changed hands in 1998,
2008 power passed from Fidel V. Ramos to his vice president,
Hong Kong 0.891 0.879 0.859 1.000 0.750 Joseph Estrada. There were no major political changes
Indonesia 0.836 0.962 0.719 0.859 0.749 comparable to those countries discussed above, and the
Japan 0.879 0.836 1.000 0.976 0.236
corporate ownership arrangements simply reinforced pre-
Korea 0.757 0.917 0.905 0.818 1.000
Malaysia 0.743 0.911 1.000 0.784 0.840 vailing patterns between 1996 and 2008, corresponding to a
Philippines 0.836 0.961 0.601 0.980 0.560 substantial increase in family ownership. Singapore, by
Singapore 0.809 0.871 0.770 1.000 0.657 comparison, went relatively unscathed by the financial crisis,
Taiwan 0.870 0.902 0.822 0.944 n.a. its political system went unchanged, and its ownership
Thailand 0.829 0.817 1.000 0.941 0.574
arrangements did not exhibit any major shifts between the
East Asia two points in time with family and state ownership
0.827 0.895 0.853 0.922 0.671
nine predominating.
Change The findings suggest that although countries often talk
Hong Kong 0.031  0.121  0.025 0.019 about implementing corporate governance reforms that
Indonesia 0.170 0.007  0.281  0.125 should push them toward greater widely held ownership,
Japan  0.095  0.164 0.469  0.024 political will is needed to produce the desired outcomes.
Korea  0.104  0.064 0.032 -0.131
Malaysia  0.048  0.062 0.000  0.170
Philippines 0.015 0.013 -0.337 0.019 8. Conclusion
Singapore 0.097 0.181  0.153 0.065
Taiwan 0.115  0.098  0.079 0.059 Prior research on corporate governance in East Asia has
Thailand  0.094  0.173 0.000  0.059
primarily focused either on analyzing corporate governance
East Asia
0.01  0.053  0.042  0.039 arrangements for a single time or changes across time for a
nine single ownership type (commonly family-dominated firms
in a single country). In this paper, we map changes to East
correspond to a dramatic fall in family ownership as well Asia’s largest corporations for a variety of ownership types
as a substantial increase in widely held ownership. across time. We find that family control remains the most
By contrast, the other countries that experienced little common form of ownership, though clear changes have
or no political change did not witness any major changes occurred for nearly every country. Specifically, between
to the prevailing forms of corporate ownership. Where 1996 and 2008 the state has become significantly more
there were substantial increases in one type of ownership, important as an owner in Hong Kong, Indonesian firms
those increases tended to reinforce the dominance of remain heavily dominated by family ownership though less
preexisting ownership categories. In Japan, no major than before, widely held ownership has remained dominant
political changes occurred that would be comparable in Japan, Korean firms continue to be dominated by family
to those countries discussed above and the changes ownership with widely held ownership also being impor-
to prevailing forms of ownership occurred between two tant, Malaysian firms have experienced substantial state
 R.W. Carney, T.B. Child / Journal of Financial Economics 107 (2013) 494–513
Table 11
Correspondence between political changes and ownership changes.
Country Major political changes?
Hong Kong Handover to China in 1997
Indonesia End of Suharto regime and democratization ensues in
1998 with a new constitution
Japan No change Neutral change; a decline in widely held ownership matched by a rise in
Korea Little change
Malaysia No change Rise in state-ownership reinforces pre-existing importance of the state
Philippines No change Rise in family ownership reinforces pre-existing importance of families
Singapore No change
Taiwan End of the Kuomintang’s 55-year rule in 2000 Significant decline in family ownership matched by significant rise in widely
Thailand Democratization ensues in 1997 with a new constitution Significant decline in family ownership matched by significant rise in widely
intervention, firms in the Philippines have consolidated their
orientation toward family-control, Singaporean firms have
maintained the status quo with a combination of family and
state ownership, Taiwan’s largest firms have shifted strongly
toward widely held ownership and away from family-
dominated ownership, and firms in Thailand have shifted
away from family dominance toward a somewhat larger role
for the state but with a very substantial increase in widely
held ownership. And in nearly every country, state owner-
ship – both domestic and foreign – has increased.
The means by which owners could enhance their control
also exhibit some interesting changes. The use of pyramids
has increased in some countries (notably Korea and Thailand)
but has declined substantially in Indonesia, Singapore and
Taiwan. But among firms with a dominant owner, there has
been a significant increase in those that are controlled by a
single shareholder, with Korea at the top. While ownership
patterns have exhibited interesting, and sometimes surpris-
ing, changes across time, the separation of ownership and
control has exhibited relatively little change. Ownership and
control generally remain tightly bound together.
Whether countries underwent major political trans-
formations can best account for the aforementioned
changes in corporate control and ownership. Where major
political changes occurred, the corporate landscape would
also change. Where there were no major political trans-
formations, prevailing patterns of corporate ownership
and control would persist or become more entrenched.
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