IDEAS home Printed from https://ideas.repec.org/a/eee/pacfin/v18y2010i5p460-476.html
   My bibliography  Save this article

Changes in Malaysia: Capital controls, prime ministers and political connections

Author

Listed:
  • Mitchell, Heather
  • Joseph, Saramma

Abstract

During the 1997 Asian currency crisis and resulting imposition of capital controls in Malaysia, evidence from previous studies shows that firms with political connections suffered more during the crisis but benefited more when capital controls were introduced. In the period since then, the evidence shows financial firms with political connections have not performed as well as others since the measures set up to support them have been removed. The study period not only includes the relaxation of capital controls, but also the resignation of Tun Dr. Mahathir Mohammad as prime minister and the handover of control to Datuk Seri Abdullah Ahmad Badawi.

Suggested Citation

  • Mitchell, Heather & Joseph, Saramma, 2010. "Changes in Malaysia: Capital controls, prime ministers and political connections," Pacific-Basin Finance Journal, Elsevier, vol. 18(5), pages 460-476, November.
    • Handle: RePEc:eee:pacfin:v:18:y:2010:i:5:p:460-476
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927-538X(10)00039-9
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Randall Morck & David Stangeland & Bernard Yeung, 2000. "Inherited Wealth, Corporate Control, and Economic Growth The Canadian Disease?," NBER Chapters, in: Concentrated Corporate Ownership, pages 319-372, National Bureau of Economic Research, Inc.
    2. Morck, Randall K. (ed.), 2000. "Concentrated Corporate Ownership," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226536781, December.
    3. Ethan Kaplan & Dani Rodrik, 2002. "Did the Malaysian Capital Controls Work?," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 393-440, National Bureau of Economic Research, Inc.
    4. Randall K. Morck, 2000. "Concentrated Corporate Ownership," NBER Books, National Bureau of Economic Research, Inc, number morc00-1, March.
    5. Johnson, Simon & Mitton, Todd, 2003. "Cronyism and capital controls: evidence from Malaysia," Journal of Financial Economics, Elsevier, vol. 67(2), pages 351-382, February.
    6. Raghuram G. Rajan & Luigi Zingales, 1998. "Which Capitalism? Lessons Form The East Asian Crisis," Journal of Applied Corporate Finance, Morgan Stanley, vol. 11(3), pages 40-48, September.
    7. MARA FACCIO & RONALD W. MASULIS & JOHN J. McCONNELL, 2006. "Political Connections and Corporate Bailouts," Journal of Finance, American Finance Association, vol. 61(6), pages 2597-2635, December.
    8. Choudhry, Taufiq, 2005. "Time-varying beta and the Asian financial crisis: Evidence from Malaysian and Taiwanese firms," Pacific-Basin Finance Journal, Elsevier, vol. 13(1), pages 93-118, January.
    9. Chong, Beng-Soon & Liu, Ming-Hua & Tan, Kok-Hui, 2006. "The wealth effect of forced bank mergers and cronyism," Journal of Banking & Finance, Elsevier, vol. 30(11), pages 3215-3233, November.
    10. Sebastian Edwards & Jeffrey A. Frankel, 2002. "Preventing Currency Crises in Emerging Markets," NBER Books, National Bureau of Economic Research, Inc, number edwa02-2, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hoepner, Andreas G.F. & Lin, Ming-Tsung, 2022. "Do shareholder views affect corporate political activities?," International Review of Financial Analysis, Elsevier, vol. 84(C).
    2. Christopher Andrew Hartwell, 2014. "Capital Controls and the Determinants of Entrepreneurship," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(6), pages 434-456, December.
    3. Vincent Tawiah & Abdulrasheed Zakari & Yan Wang, 2022. "Partisan political connections, ethnic tribalism, and firm performance," Review of Quantitative Finance and Accounting, Springer, vol. 58(4), pages 1331-1362, May.
    4. Santiago Kopoboru & Gloria Cuevas-Rodríguez & Leticia Pérez-Calero, 2020. "Boards that Make a Difference in Firm’s Acquisitions: The Role of Interlocks and Former Politicians in Spain," Sustainability, MDPI, vol. 12(3), pages 1-19, January.
    5. Shen, Chung-Hua & Bui, Dien Giau & Lin, Chih-Yung, 2017. "Do political factors affect stock returns during presidential elections?," Journal of International Money and Finance, Elsevier, vol. 77(C), pages 180-198.
    6. Sharma, Piyush & Cheng, Louis T.W. & Leung, T.Y., 2020. "Impact of political connections on Chinese export firms' performance – Lessons for other emerging markets," Journal of Business Research, Elsevier, vol. 106(C), pages 24-34.
    7. Tee, Chwee-Ming & Wong, Wai-Yan & Hooy, Chee-Wooi, 2022. "Government power and the value of political connections: Evidence from Covid-19 economic lockdowns," Finance Research Letters, Elsevier, vol. 47(PB).
    8. Ebrahim, M. Shahid & Girma, Sourafel & Shah, M. Eskandar & Williams, Jonathan, 2014. "Dynamic capital structure and political patronage: The case of Malaysia," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 117-128.
    9. Pham, Nga & Oh, K.B. & Pech, Richard, 2015. "Mergers and acquisitions: CEO duality, operating performance and stock returns in Vietnam," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 298-316.
    10. Wong, Wai-Yan & Hooy, Chee-Wooi, 2018. "Do types of political connection affect firm performance differently?," Pacific-Basin Finance Journal, Elsevier, vol. 51(C), pages 297-317.
    11. Khanh Hoang & Thanh Tat Tran & Hien Thi Thu Tran & Anh Quoc Le, 2022. "Do different political connections affect financial reporting quality differently? Evidence from Malaysia," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(2), pages 289-300, March.
    12. Ignatius Roni Setyawan & Buddi Wibowo, 2021. "Does Entropy Index Explain the Determinant of Capital Market Integration in ASEAN?," Capital Markets Review, Malaysian Finance Association, vol. 29(1), pages 17-39.
    13. Jasman Tuyon & Zamri Ahmada, 2016. "Behavioural finance perspectives on Malaysian stock market efficiency," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 16(1), pages 43-61, March.
    14. Hartwell, Christopher A., 2011. "All That’s Old is New Again: Capital Controls and the Macroeconomic Determinants of Entrepreneurship in Emerging Markets," MPRA Paper 40257, University Library of Munich, Germany.
    15. Stephen Gray & Iman Harymawan & John Nowland, 2016. "Political and government connections on corporate boards in Australia: Good for business?," Australian Journal of Management, Australian School of Business, vol. 41(1), pages 3-26, February.
    16. Razak, Lutfi Abdul & Masih, Mansur, 2017. "Revisit Feldstein-Horioka puzzle: evidence from Malaysia (1960-2015)," MPRA Paper 79407, University Library of Munich, Germany.
    17. Amiruddin BIN MUHAMED & Rebecca STRÄTLING & Aly SALAMA, 2014. "The Impact Of Government Investment Organizations In Malaysia On The Performance Of Their Portfolio Companies," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 85(3), pages 453-473, September.
    18. Wai-Ching Poon & Angeline Yap & Teck-Heang Lee, 2013. "The Outcome of Politically Connected Boards on Commercial Bank Performance in Malaysia," Modern Applied Science, Canadian Center of Science and Education, vol. 7(1), pages 1-35, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Clement Chow & Michael Fung & Kevin Lam & Heibatollah Sami, 2012. "Investment opportunity set, political connection and business policies of private enterprises in China," Review of Quantitative Finance and Accounting, Springer, vol. 38(3), pages 367-389, April.
    2. Habib, Ahsan & Muhammadi, Abdul Haris & Jiang, Haiyan, 2017. "Political connections, related party transactions, and auditor choice: Evidence from Indonesia," Journal of Contemporary Accounting and Economics, Elsevier, vol. 13(1), pages 1-19.
    3. Ayyagari, Meghana & Demirguc-Kunt, Asli & Maksimovic, Vojislav, 2012. "Financing of firms in developing countries : lessons from research," Policy Research Working Paper Series 6036, The World Bank.
    4. Parsley, David & Faccio, Mara, 2006. "Sudden Deaths: Taking Stock of Political Connections," CEPR Discussion Papers 5460, C.E.P.R. Discussion Papers.
    5. Chaney, Paul K. & Faccio, Mara & Parsley, David, 2011. "The quality of accounting information in politically connected firms," Journal of Accounting and Economics, Elsevier, vol. 51(1), pages 58-76.
    6. Faccio, Mara & Parsley, David C., 2009. "Sudden Deaths: Taking Stock of Geographic Ties," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(3), pages 683-718, June.
    7. Johnson, Simon & Mitton, Todd, 2003. "Cronyism and capital controls: evidence from Malaysia," Journal of Financial Economics, Elsevier, vol. 67(2), pages 351-382, February.
    8. Habib, Ahsan & Ranasinghe, Dinithi & Muhammadi, Abdul Haris & Islam, Ainul, 2018. "Political connections, financial reporting and auditing: Survey of the empirical literature," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 31(C), pages 37-51.
    9. Bunkanwanicha, Pramuan & Wiwattanakantang, Yupana & ウィワッタナカンタン, ユパナ, 2006. "Big Business Owners and Politics: Investigating the Economic Incentives of Holding Top Office," CEI Working Paper Series 2006-10, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    10. Bodnaruk, Andriy & Massa, Massimo & Yadav, Vijay, 2017. "Family ownership, country governance, and foreign portfolio investment," Journal of Empirical Finance, Elsevier, vol. 41(C), pages 96-115.
    11. Claessens, Stijn & Perotti, Enrico, 2007. "Finance and inequality: Channels and evidence," Journal of Comparative Economics, Elsevier, vol. 35(4), pages 748-773, December.
    12. Kim, Chansog (Francis) & Pantzalis, Christos & Chul Park, Jung, 2012. "Political geography and stock returns: The value and risk implications of proximity to political power," Journal of Financial Economics, Elsevier, vol. 106(1), pages 196-228.
    13. Ms. Natalia T. Tamirisa & Mr. Simon Johnson & Ms. Kalpana Kochhar & Todd Mitton, 2006. "Malaysian Capital Controls: Macroeconomics and Institutions," IMF Working Papers 2006/051, International Monetary Fund.
    14. Jenifer Piesse & Roger Strange & Fahad Toonsi, 2012. "Is there a distinctive MENA model of corporate governance?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 16(4), pages 645-681, November.
    15. Randall Morck, 2011. "Finance and Governance in Developing Economies," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 375-406, December.
    16. Raghuram G. Rajan & Luigi Zingales, 2000. "The Great Reversals: The Politics of Financial Development in the 20th Century," OECD Economics Department Working Papers 265, OECD Publishing.
    17. Kant, Chander, 2018. "Financial openness & institutions in developing countries," Research in International Business and Finance, Elsevier, vol. 46(C), pages 240-250.
    18. Charles Calomiris & Joseph Mason, 2004. "How to Restructure Failed Banking Systems: Lessons from the United States in the 1930s and Japan in the 1990s," NBER Chapters, in: Governance, Regulation, and Privatization in the Asia-Pacific Region, pages 375-420, National Bureau of Economic Research, Inc.
    19. Chari, Anusha & Blair Henry, Peter, 2008. "Firm-specific information and the efficiency of investment," Journal of Financial Economics, Elsevier, vol. 87(3), pages 636-655, March.
    20. Masami Imai, 2006. "Mixing Family Business with Politics in Thailand," Asian Economic Journal, East Asian Economic Association, vol. 20(3), pages 241-256, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pacfin:v:18:y:2010:i:5:p:460-476. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/pacfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.