The East Asian crisis and financing corporate investment:is there a cause for concern?

In view of limited empirical evidence concerning the microeconomic aspects of corporate financial problems in the East Asian countries in the 1990s, this paper analyses the financing pattern of corporate investment in Indonesia, Korea, Malaysia, and Thailand. The analysis is based on an unbalanced panel of listed firms during the period 1989–1997. By using firm size, retention practices, and leverage as three different indicators of financial constraint on firm investment, we have examined the role of various internal and external financing variables on corporate investment in the sample countries. Results indicate that a large number of sample firms depend on free cash flow, especially in Indonesia; there was also a steady increase in debt-equity ratio in all countries. There were signs of agency costs in the use of cash flow in Korea and Malaysia and also in the use of debt financing in Malaysia and Thailand. There was also sign of over-investment among the Thai firms during 1994–1997 though it appears very little if at all was done to redress it in time.

Do external funds yield lower returns? Recent evidence from East Asian economies

One of the central explanations of the recent Asian Crisis has been the problem of moral hazard as the source of over-investment and excessive external borrowing. There is however rather limited firm-level empirical evidence to characterise inefficient use of internal and external finances. Using a large firm-level panel data-set from four badly affected Asian countries, this paper compares the rates of return to various internal and external funds among firms with low and high debt financing (relative to equity) among financially constrained and other firms. Selectivity-corrected estimates obtained from random effects panel data model do suggest evidence of significantly lower rates of return to long-term debt, even among firms relying more on debt relative to equity in our sample. There is also evidence that average effective interest rates often significantly exceeded the average returns to long-term debt in the sample countries in the pre-crisis period. © 2006 Elsevier Inc. All rights reserved.

Lessons for African economies from Irish and East Asian industry policy

When comparisons in terms of industrial policy lessons to be learned have taken place, it has tended to be solely vis-a-vis the ‘development state’ East Asian experience. This paper broadens the analysis and considers lessons which African countries can learn from other so-called ‘tiger’ economies including Ireland and the East and South Asian countries. We recognise that the latter are indeed clearly significant as many African countries at the time of independence had economic structures and levels of income quite similar to East Asian countries, yet have grown at vastly different rates since then. Exploring why this has been the case can thus offer important insights into possibilities for industrial policy. Yet this comes with some health warnings over East Asian experience. We suggest that another important contribution can come by looking at the Irish example, given its emphasis on corporatism rather than simply relying on state direction in the operation of industrial policy. The Irish model is also more democratic in some senses and has protected workers’ rights during the development process in contrast to the often highly dirigisite East Asian model. Overall we suggest that some immediate actions are needed, notably with regard to the financial system in small African economies. Without such changes, a poorly functioning financial system will continue to keep investment at low levels. In relation to the small size of the African economies, the paper recommends regional integration and sufficient overseas development assistance (ODA) for infrastructural development. It is also critical to note that the various small African economies each face their own industrial and economic development challenges, and that a ‘one size fits all’ approach is not appropriate; rather the key is to tailor policies and systems to the unique opportunities and development challenges in each African country.

The influence of face and group orientation on the perception of luxury goods:a four market study of East Asian consumers

Purpose: The paper aims to further extend our understanding by assessing the extent to which two prominent cultural values in East Asia i.e. face saving and group orientation drive consumers' perceptions of luxury goods across four East Asian markets. Design/methodology/approach: A multi-methods research approach was adopted consisting of: an expert panel of close to 70 participants, group discussions with five extended East Asian families, personal interviews with eight East Asian scholars, a pilot test with over 50 East Asian graduate students and a multi-market survey of 443 consumer respondents in Beijing, Tokyo, Singapore and Hanoi. Findings: The authors extend previous conceptual studies by empirically investigating the impact of these two cultural values on the perception of luxury among East Asian societies. Specifically the study reveals that across all four markets face saving has the strongest influence on the conspicuous and hedonistic dimensions of luxury, group orientation meanwhile is the strongest predictor of the quality, extended self and exclusivity dimensions of luxury. Collectively these two cultural values significantly influence East Asian perceptions of luxury. Overall, the findings reiterate the importance of understanding different cultural values and their influence across different East Asian societies. Practical implications: The findings have important implications for managers of western luxury branded goods that are seeking to penetrate East Asian markets or seek to serve East Asian consumers. Specifically, to assist with developing suitable brand positioning, products, services, communications and pricing strategies. Originality/value: This study contributes to our understanding of the subject by exploring the impact of face saving and group orientation on the perception of luxury goods across four East Asian countries. Several directions for future research are suggested. © Emerald Group Publishing Limited.

The Kim Dynasty and North-East Asian security:breaking the cycle of crises?

Purpose—This article considers North Korea and the notion of crisis, by linking historical development over the Korean peninsula to the conflict resolution literature, and investigates why despite a large number of destabilizing events, a war involving Pyongyang has yet to erupt. Design/methodology—This article uses historical data and a framework developed by Aggarwal et al., in order to highlight patterns of interaction between states such as the United States, North Korea and South Korea, organizations such as the United Nations, as well as processes such as the Six- Party Talks and the Agreed Framework. The article then develops a crisis framework based on conflict resolution and negotiation literature, and applies it to three North Korean administrations. Findings—Findings suggest that an open- ended understanding of time (for all parties involved on the peninsula) leads to an impossibility to reach a threshold where full- scale war would be triggered, thus leaving parties in a stable state of crisis for which escalating moves and de- escalating techniques might become irrelevant. Practical implications—It is hoped that this article will help further endeavors linking conflict resolution theoretical frameworks to the Korean peninsula security situation. In the case of the Korean peninsula, time has been understood as open-ended, leading parties to a lingering state of heightened hostilities that oscillates toward war, but that is controlled enough not to reach it. In-depth analysis of particular security sectors such as nuclear energy, food security, or missile testing would prove particularly useful in understanding the complexity of the Korean peninsula situation to a greater extent. It is hoped that this paper will help further endeavours linking conflict resolution theoretical frameworks to the Korean peninsula security situation. Originality/value—This research suggests that regarding the Korean peninsula, time has been understood as open- ended, leading parties to a lingering state of heightened.

The Kim Dynasty and North-East Asian security:breaking the cycle of crises

This article considers North Korea and the notion of crisis, by linking historical development over the Korean peninsula to the conflict resolution literature, and investigates why despite a large number of destabilising events, a war involving Pyongyang has yet to erupt. The paper considers historical data and uses a framework developed by Aggarwal et al. in order to highlight patterns of interaction between states such as the United States, North Korea and South Korea, organisations such as the United Nations, as well as processes such as the Six-Party Talk and the Agreed Framework. The paper then develops a crisis framework based on conflict resolution and negotiation literature, and applies it to three North Korean administrations. Findings suggests that an elastic understanding of time (for all parties involved on the peninsula) leads to an impossibility to reach a threshold where full-scale war would be triggered, thus leaving parties in a stable state of crisis for which escalating moves and de-escalating techniques might become irrelevant.

Evolution of capital structure in East Asia - corporate inertia of endeavours?

The paper examines the capital structure adjustment dynamics of listed non-financial corporations in seven east Asian countries before, during and after the crisis of 1997–1998. Our methodology allows for speeds of adjustment to vary, not only among firms, but also over time, distinguishing between cases of sudden and smooth adjustment.Whereas, compared with firms in the least affected countries, average leverages were much higher, generalized method-ofmoments analysis of the Worldscope panel data suggests that average speeds of adjustment were lower in the worst affected countries. This holds also for the severely financially distressed firms in some worst affected countries, though the trend reversed in the post-crisis period. These findings have important implications for the regulatory environment as well as access to market finance.

How does ownership structure affect capital structure and firm value?:Recent evidence from East Asia

The present paper examines the effects of ownership structures on capital structure and firm valuation. It argues that the effects of separation of control from cash flow rights on capital structure and firm value also depend on the separation of control from management as well as on legal rules and enforcement defining investors' protection. We obtain firm-level panel data (three stage least squares, 3SLS) estimates from four of the East Asian countries worst affected by the last crisis. There is evidence that the general wisdom that higher control than cash flow rights may lower firm value may be reversed among owner-managed family firms in the sample countries. © 2007 The Authors Journal compilation © 2007 The European Bank for Reconstruction and Development.

Managing human resources in Asia-Pacific

This book presents an HRM scenario in a number of South-East Asian and Pacific Rim countries. It highlights the growth of the personnel/HR function, the dominant HRM system(s) in the area, the influence of different factors on HRM, and the challenges faced by HR functions in these nations. An excellent addition to this subject area, each chapter has been written by an area specialist. As the most topical and up-to-date book in its field, this outstanding book is suitable for both academics and practitioners in the field.

The impact of Islamic banking on the cost efficiency and productivity change of Malaysian commercial banks

This study employs stochastic frontier analysis to analyze Malaysian commercial banks during 1996-2002, and particularly focuses on determining the impact of Islamic banking on performance. We derive both net and gross efficiency estimates, thereby demonstrating that differences in operating characteristics explain much of the difference in costs between Malaysian banks. We also decompose productivity change into efficiency, technical, and scale change using a generalised Malmquist productivity index. On average, Malaysian banks experience moderate scale economies and annual productivity change of 2.68 percent, with the latter driven primarily by technical change, which has declined over time. Our gross efficiency estimates suggest that Islamic banking is associated with higher input requirements. However, our productivity estimates indicate that full-fledged Islamic banks have overcome some of these cost disadvantages with rapid technical change, although this is not the case for conventional banks operating Islamic windows. Merged banks are found to have higher input usage and lower productivity change, suggesting that bank mergers have not contributed positively to bank performance. Finally, our results suggest that while the East Asian financial crisis had a short-term cost-reducing effect in 1998, the crisis triggered a more lasting negative impact by increasing the volume of non-performing loans.

Ametropia and ocular biometry in a UK university student population

Purpose. The prevalence of myopia is known to vary with age, ethnicity, level of education, and socioeconomic status, with a high prevalence reported in university students and in people from East Asian countries. This study determines the prevalence of ametropia in a mixed ethnicity U.K. university student population and compares associated ocular biometric measures. Methods. Refractive error and related ocular component data were collected on 373 first-year U.K. undergraduate students (mean age = 19.55 years ± 2.99, range = 17-30 years) at the start of the academic year at Aston University, Birmingham, and the University of Bradford, West Yorkshire. The ethnic variation of the students was as follows: white 38.9%, British Asian 58.2%, Chinese 2.1%, and black 0.8%. Noncycloplegic refractive error was measured with an infrared open-field autorefractor, the Shin-Nippon NVision-K 5001 (Shin Nippon, Ryusyo Industrial Co. Ltd, Osaka, Japan). Myopia was defined as a mean spherical equivalent (MSE) less than or equal to -0.50 D. Hyperopia was defined as an MSE greater than or equal to +0.50 D. Axial length, corneal curvature, and anterior chamber depth were measured using the Zeiss IOLMaster (Carl Zeiss, Jena, GmBH). Results. The analysis was carried out only for white and British Asian groups. The overall distribution of refractive error exhibited leptokurtosis, and prevalence levels were similar for white and British Asian (the predominant ethnic group) students across each ametropic group: myopia (50% vs. 53.4%), hyperopia (18.8% vs. 17.3%), and emmetropia (31.2% vs. 29.3%). There were no significant differences in the distribution of ametropia and biometric components between white and British Asian samples. Conclusion. The absence of a significant difference in refractive error and ocular components between white and British Asian students exposed to the same educational system is of interest. However, it is clear that a further study incorporating formal epidemiologic methods of analysis is required to address adequately the recent proposal that juvenile myopia develops principally from myopiagenic environments and is relatively independent of ethnicity.

One date, one break?

This paper demonstrates that the conventional approach of using official liberalisation dates as the only existing breakdates could lead to inaccurate conclusions as to the effect of the underlying liberalisation policies. It also proposes an alternative paradigm for obtaining more robust estimates of volatility changes around official liberalisation dates and/or other important market events. By focusing on five East Asian emerging markets, all of which liberalised their financial markets in the late, and by using recent advances in the econometrics of structural change, it shows that (i) the detected breakdates in the volatility of stock market returns can be dramatically different to official liberalisation dates and (ii) the use of official liberalisation dates as breakdates can readily entail inaccurate inference. In contrast, the use of data-driven techniques for the detection of multiple structural changes leads to a richer and inevitably more accurate pattern of volatility evolution emerges in comparison with focussing on official liberalisation dates.

Stock market efficiency before and after a financial liberalisation reform:do breaks in volatility dynamics matter?

This article focuses on the deviations from normality of stock returns before and after a financial liberalisation reform, and shows the extent to which inference based on statistical measures of stock market efficiency can be affected by not controlling for breaks. Drawing from recent advances in the econometrics of structural change, it compares the distribution of the returns of five East Asian emerging markets when breaks in the mean and variance are either (i) imposed using certain official liberalisation dates or (ii) detected non-parametrically using a data-driven procedure. The results suggest that measuring deviations from normality of stock returns with no provision for potentially existing breaks incorporates substantial bias. This is likely to severely affect any inference based on the corresponding descriptive or test statistics.

Capabilities and competitiveness of Chinese state owned manufacturing enterprises:what has been learned over 20 years and what remains to be learned

Technological capabilities in Chinese manufacturing have been transformed in the last three decades. However, the extent to which and how domestic market oriented state owned enterprises (SOEs) have developed their capabilities remain important questions. The East Asian latecomer model has been adapted to study six Chinese SOEs in the automotive, steel and machine tools sectors to assess capability levels attained and the role of external sources and internal efforts in developing them. All six enterprises demonstrate high competence in operating established technology, managing investment and making product and process improvements but differ in innovative capability. While the East Asian latecomer model in which linking, leveraging and learning explain technological capability development is relevant for the companies studied, it needs to be adapted for Chinese SOEs to take account of types of external links and leverage of enterprises, the role of government, enterprise level management motives and means of financing development.

International technology transfer and development of capabilities in Chinese state-owned manufacturing enterprises:lessons from 20 years of case research

Technological capabilities in Chinese manufacturing have been transformed in the last three decades. However, the extent to which domestic market oriented state owned enterprises (SOEs) have developed their capabilities is not clear. Six SOEs in the automotive, steel and machine tools sectors in Beijing and Tianjin have been studied since the mid-1990s to assess the capability levels attained and the role of external sources and internal efforts in developing them. Aided by government policies, acquisition of technology and their own efforts, the case study companies appear to be broadly following the East Asian late industrialisation model. All six enterprises demonstrate competences in operating established technology, managing investment and making product and process improvements. The evidence suggests that companies without foreign joint venture (JV) collaborations have made more progress in this respect.