East Asian Business in the New World

East Asian Business in the New World

Helping Old Economies Revitalize
2016, Pages 83-94
East Asian Business in the New World

Chapter 6 - Information and Investment in East Asia: What We Need to Know When Investing in Relation-Based Societies*

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The main message of this chapter is that in relation-based societies such as East Asia, businesses are conducted and protected via personal relations, and publicly verifiable information, such as listed companies’ annual reports and public accounting information, is less reliable and is often ignored by the insiders. Understanding the different governance mechanisms used in relation-based versus rule-based environments will shed light on how to structure and protect investment in Asia. This theory will explain why relation-based economies tend to have a more poorly regulated stock market, and why direct investment provides a more efficient and effective protection for the investor in such an environment.

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Adopted from Li, S. (2009). Managing international business in relation-based versus rule-based countries. New York, NY: Business Expert Press.

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