The Asian company model is undergoing a fundamental change. This change’s scale, range, and depth, especially after the Asian crisis, are so significant that many, though not all, established perceptions and definitions are no longer applicable. We need new ones to adequately portray the present state of things and the direction of change.
East Asian companies cannot rely on massive state support and close interaction with the government in the way they used to. As mentioned, today, the state is pushing their restructuring and reorganization to make them more self-reliant and efficient.
Another big change to the business environment in Asia is a shift from bank loans to equity as the source of financing. Between 1990 and 2005, Asia’s capitalization more than doubled. Excluding Japan, it rose almost tenfold. The capitalization of Japan, NIEs, ASEAN 4, China, and India combined reached US$ 12.2 trillion (Japan’s “contribution” was US$ 7.5 trillion), or almost 30 percent of world capitalization (Purfield 2006).
In 2005, leverages, or corporate debt/equity ratios in, for example, Thailand, South Korea, and Malaysia were 0.70–0.75 (Burton 2007), which is much lower than on the eve of the Asian crisis (see page 19). The close relationship between companies and banks resulting in massive lending, often at much less than arm’s length and with the blessing of the state, has become impossible to preserve. In the wake of the Asian crisis ...