Corporate Finance Strategies of European Firms: Between Opportunities and Continuation

The purpose of this chapter is to describe the corporate finance strategies of European firms in Southeast Asia after the currency crisis that started with the devaluation of the Thai baht in July 1997, and which soon spread to neighbouring countries becoming a full-fledged financial and economic crisis encompassing the whole region. Although currencies in Southeast Asian countries were to some extent linked to the US dollar, the financial markets in the region were not as integrated as in Europe. At the outbreak of the crisis in the summer of 1997, there were also differences between the macroeconomic positions of the different countries in the region. The most vulnerable countries were those with substantial short-term foreign debt compared to their foreign exchange reserves. Indonesia and Thailand were hit much harder than Singapore and the Philippines. Malaysia decided, as the only country in the region - albeit at a later stage - to impose capital controls and fixed the ringgit at 3.80 to the US dollar in September 1998. Despite important differences between single countries, this chapter will only refer to individual countries when considered relevant.