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4 free eassay
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The East Asian financial crisis of 1997-98 demonstrated the importance of effective corporate governance in developing countries (Krugman 1994; Radelet and Sachs 1998; Rasiah 1999). Malaysia was adversely affected by this financial crisis. The contraction of the Malaysian economy, along with instability in the exchange rate and a marked decline in share prices, adversely affected the corporate sector. This resulted in considerable retrenchment and downsizing of operations, and the closure of many firms.
Poor governance standards in both private and government-owned firms were blamed in part for the East Asian financial crisis. In Asia, corporations tend to follow the "insider" model, with the dominant control held by the original owners and large shareholders (Sycip 1998; Yamazawa 1998). The erosion of investor confidence was identified as one of the major factors that exacerbated the financial crisis in Malaysia and other Asian countries. Many commentators, such as Noordin (1999b), argued that the erosion of investor confidence in Malaysia was brought about by the country's poor corporate governance standards and a lack of transparency in the financial system. Therefore, the restoration of confidence in the economy by investors will rely on improvements in corporate governance standards, including the adoption of transparency as an important strategy in corporate management. With the economic recovery of most East Asian countries, attention has understandably been drawn...
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