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Seeking evidence on the role of bank governance in the 1997 crisis, we study financial structure and bank performance from 1987 to 1997. Financial performance ratios (capital adequacy, liquidity, profitability, and loan preference) are regressed on structural variables (bank assets, net income, administrative expenses, and time), focusing on banks’ management efficiency and financial performance. During financial liberalization, loan-preference ratios were higher, perhaps signaling more risk; so were capital-adequacy ratios. Capital adequacy falls, then rises as management size increases; profitability behaves oppositely, indicating diminishing returns. Thailand’s, Korea’s and Indonesia’s banks show stronger lending preference but weaker profitability; possible harbingers of crisis. |
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