Economics & Finance / Business & Management / Corporate Strategy & Governance

Why Korea’s Top Companies Were Doomed Before the 1997 Crisis: The Hidden Governance Trap

Stijn Claessens

Before the 1997 Asian financial crisis, South Korea’s economy seemed unstoppable—until it wasn’t. This video dives into a groundbreaking study from the *Journal of Financial Economics* that reveals the real culprit: weak corporate governance. Authors like Stijn Claessens and others analyzed 5,829 Korean firms from 1993 to 1997, showing how ownership structures and control-ownership disparities led to systematic profit erosion. Key findings: when controlling shareholders had less cash flow rights, they drained resources—especially in listed firms and chaebols. This wasn’t just bad management; it was a systemic failure that made the entire economy vulnerable. Watch to understand how governance gaps can silently destroy value and what this means for investors today. No jargon, just eye-opening insights.