The Separation of Ownership and Control in
East Asian Corporations
Stijn Claessens*, Simeon Djankov*∧, and Larry H.P. Lang**
* World Bank
** Chinese University of Hong Kong
Abstract
We examine the separation of ownership and control for 2,980 corporations in nine East
Asian countries. In all countries, voting rights frequently exceed cash-flow rights via
pyramid structures and cross-holdings. The separation of ownership and control is most
pronounced among family-controlled firms and small firms. More two-thirds of firms are
controlled by a single shareholder. Managers of closely held firms tend to be relatives of
the controlling shareholder’s family. Older firms are generally family-controlled,
dispelling the notion that ownership becomes dispersed over time. Finally, significant
corporate wealth in East Asia is concentrated among a few families.
1. Introduction
Much of the literature on the role and functioning of the modern firm is based on
the assumption of widely dispersed ownership. This notion originally derives from Berle
and Means (1932) and has been propagated by Baumol (1959), Jensen and Meckling
(1976), and Grossman and Hart (1980). A more recent line of the literature shows,
however, that some concentration of ownership exists even among the largest American
corporations (Demsetz, 1983; Shleifer and Vishny, 1986; Morck, Shleifer, and Vishny,
1988), and that an even higher level of ownership concentration exists in other
developed and developing countries (La Porta et al., 1998, 1999).