Abstract:
The Asian financial crisis, which can be characterized as a capital account crisis with the twin features of a financial crisis, i.e., currency crisis (international) and banking crisis (domestic) (see Yoshitomi and Ohno, 1999), has highlighted the weaknesses of the domestic banking system and hence underlying corporate governance. In Asia, banks are the dominant source of external finance so that they are naturally expected to have effectively monitored firms as borrowers during the “Asian Miracle” period. However, in retrospect, banks appear to have failed to do so. There are several reasons for the weakness of the banking system in Asia.