Corporate Governance for Asian Publicly Listed Family-Controlled Firms - Full Report

Tom Berry    Tony Tan, DBA, CFA, Fianna Jurdant
06 Aug 2018
Categories: Investor Education, Corporate Finance

Country or region: Asia Pacific (Overall)

Summary:
There is a gap in the literature concerning regulatory responses and approaches to corporate governance of controlled family firms. This report reviews the literature to develop an overview of the economic landscape of publicly listed family firms in Asia and to demonstrate the importance of these entities to the region and beyond. Another objective is to illustrate the challenges that confront policymakers in developing corporate governance policies relevant to publicly listed family firms. Discussion in the report indicates two significant hurdles for policymakers. First, there is a lack of consensus on a universal definition of a publicly listed family firm. Second, publicly listed family firms should not be perceived as a homogeneous group over which a “one size fits all” corporate governance blanket can be cast.

The focus of the report then shifts to highlighting how an effective corporate governance system can improve performance and create value by reducing the cost of equity and reducing capital waste. The discussion examines how properties of publicly listed family firms can enhance shareholder wealth or lead to the expropriation of wealth from minority owners. The final objective of the study is to report key observations from a series of case studies spanning 14 Asian economies that cover a range of corporate governance issues central to publicly listed family firms. The case studies provide insight into current practices of Asian publicly listed family firms that may require the attention of policymakers. The issues raised in this report provide the initial building blocks for developing a more extensive road map to underpin a comprehensive analysis. Findings from this analysis can provide the foundation for evidence-based policy recommendations specific to family firms, which are a significant aspect of the Asian economic landscape and a key to the region’s current and future prosperity.

This article qualifies for 0.5 CE under the guidelines of the CFA Institute Continuing Education Program. 
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Abstract

Family firms constitute the underlying component of the business environment across Asia and have been a major driving force behind the region’s economic prosperity. To expand operations during recent decades, several Asian family firms have turned to the equity markets for financing, which has led to substantial growth in the number of listings and the total market capitalization of many Asian capital markets. This growth is expected to continue. Nonetheless, Asian publicly listed family firms are facing various external (e.g., slowing economies) and internal (e.g., forthcoming generational succession) headwinds. Strong arguments have been put forward that an effective corporate governance system not only is fundamental in ensuring stability in the face of economic headwinds but also can aid in enhancing value creation and stock performance. Various financial crises and corporate scandals have provided a catalyst for strides in strengthening corporate governance practices and standards across Asia.



Date of original publication:

08/01/2017


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