Center for Economic Institutions Working Paper Series CEI Working Paper Series, No. 2004-13 Business Groups in Thailand: Before and after the East Asian Financial Crisis Piruna Polsiri Yupana Wiwattanakantang Center for Economic Institutions Working Paper Series Institute of Economic Research Hitotsubashi University 2-1 Naka, Kunitachi, Tokyo, 186-8603 JAPAN Tel: +81-42-580-8405 Fax: +81-42-580-8333 e-mail:
[email protected] Business Groups in Thailand: Before and after the East Asian Financial Crisis Piruna Polsiri * and Yupana Wiwattanakantang ** *Department of Finance, University of Melbourne, Parkville, VIC 3010, Australia, and Department of Finance, Dhurakijpundit University, Thailand. E-mail:
[email protected] **Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University, 2-1 Naka, Kunitachi, Tokyo 186-8602, Japan. E-mail:
[email protected] April 2004 Abstract This paper investigates how business groups in Thailand had evolved since the 1950s. We argue that political connections and foreign capital among other factors were contributable to the emerging of Thai business groups. The business groups that owned banks developed fast during the late 1980s and the early 1990s until the financial deregulation, and the establishment of the Stock Exchange of Thailand, and the Bangkok International Banking Facilities. After that the groups that do not own banks have expanded rapidly. We find that the ownership and board structure of the listed firms that belong to the top 30 business groups were not affected by the crisis. Compared to the pre-crisis period, the leverage ratio for the business groups firms has increased while the profitability has declined during the post crisis of 1997-1999.