1. THE SEPARATION OF OWNERSHIP AND CONTROL IN EAST ASIAN CORPORATIONS Stijn Claessens, Simeon Djankov, Larry H.P. Lang

2. Introduction In all East Asian countries, control is enhanced through pyramid structures and cross-holdings among firms

3. Introduction Pyramid structures: owning a majority of the stock of one corporation which in turn holds a majority of the stock of another, a process that can be repeated a number of times Cross-holdings: a company further down the chain of control has some shares in another company in the same business group

4. Literature The dominance of most businees groups lies in the privileges that they solicit from the government: exclusive exporting or importing rights, protection from foreign competition for extensive periods of time, grantinng of monopoly power in the local market, procurement of large government contracts, etc.

5. Samples 2,980 publicly traded corporations in Hong Kong, Indonesia, Japan, South Korea, Malaysia, the Phillipines, Singapore, Taiwan, and Thailand

6. Results The separation of ownership and control is most pronounced among family-controlled firms and among small firms More than two-thirds of listed firms are controlled by a single shareholder

7. Results Separation of management from ownership control is rare, and the top management of about 60% of firms that are not widely held is related to the family of the controlling shareholder Older firms are more likely family controlled

8. Results Concentration of control at the individual firm level generally diminishes with the level of development In most of the developing East Asian countries, wealth is very concentrated in the hands of few families

9. Results Wealth concentration might have negatively affected the evolution of the legal and other institutional frameworks for corporate governance and the manner in which economic activity is conducted