Introduction to special issue < political trends in East Asia's corporate governance >

Abstract

This Special Issue of the Asian Journal of Political Science explores the political trends in East Asia’s corporate governance. Corporate governance was not coined in English until the 1970s, but its use and application in managing corporations have exploded since (Pargendler, 2016). Corporate governance is the system of rules and practices by which a firm is directed and controlled (OECD, 2015), to balance the interests of a firm’s stakeholders such as shareholders, the board of directors, creditors, suppliers, employees, the government, and the community. Similar to public policy which affects every sphere of our lives through government laws, regulations, court actions, etc. ranging from air pollution to tax reform, corporate governance encompasses every aspect of corporate management from decision-making by the board of directors to performance measurement and corporate disclosure. Publicly listed firms in the capital market are characterized by a separation in ownership and control (Berle & Means, 1932; Smith, 1776), and asymmetric information between owners and managers often leads to an adverse selection problem where a more informed manager’s abuse can result in an inefficient allocation of funds (Akerlof, 1970; Jensen & Meckling, 1976). Corporate governance mechanisms are useful to provide all those with interests in a firm with the correct incentives to perform their functions within a framework of checks and balances. As such, corporate governance can be defined as the governing of publicly listed firms by the board of directors on the micro-level, and the government on the macro-level. Hence, the title of this Special Issue is Political Trends in East Asia’s Corporate Governance; it is a discussion of how the macro-level corporate governance was and is shaped by political factors and government decisions as it shifted from the private to the public sector vis-à-vis listing as a public company in the capital market. Corporate governance is a growing field of study in East Asia due to the magnitude and influence of East Asian capital markets both domestically and internationally. The corporate governance of East Asian multinational firms is becoming particularly more relevant in the field of political science in dealing with systems of governance and power in a financially glocalising capital market. Specifically, corporate social responsibility, transparency, and accountability for the benefit of all capital market participants have become particularly relevant to East Asian economies where firms typically have more concentrated or family-controlled equity ownership structures compared with Western economies (Claessens et al., 2000; La Porta et al., 2000). Notwithstanding, in recent decades, there has been a significant change in East Asia’s corporate governance