Is corporate governance a way to withstand crisis propagation?

The passage from the financial sphere to the real sphere during the economic crises results in a domino effect which accelerates the spread of crises. Some companies, however, show better resistance than others thereby limiting the spread, and the effectiveness of governance mechanisms is often put forward as an explanation of the phenomenon. Two approaches are developed in this paper. The first one relates the achievement of the crisis to the failure of the legal environment (Johnson et al 2000). The second includes the stock market crisis in the context of the failure of internal governance mechanisms (Mitton 2002, Claessens et al 2000 and Il Chong and Sang 2005). The present paper focuses on the Asian stock market crisis. From a sample of 19 emerging countries, we notice that the nature of the legal framework does not allow a clear explanation of the resistance to the transmission of crises in some countries. We will try to find other explanatory factors within the firms and particularly in the governance mechanisms. These are captured by variables that have become classical today, but which were not yet admitted in the business world during the Asian crisis. Thus we have then been able to observe the intention of good governance prevailing in some businesses. The results show that the quality of governance really plays a role in reducing the spread of crises.