Importance of good corporate governance

By Prof Mohamed Ariff

THERE has been much talk about corporate governance in East Asia, including Malaysia, following the 1997/98 economic crisis.

This time around, the crisis was largely blamed on the corporate sector. The Governments in the crisis-hit countries were generally viewed as having been prudent in their fiscal management.

This indeed was the case in Malaysia where the Government had been registering fiscal surpluses for several years prior to the crisis.

Fiscal discipline was reinforced by a fairly sound monetary policy. All this, however, does not absolve Governments from all blame. For it can still be argued that the Governments were absolutely responsible for creating a policy environment, which had allowed, if not encouraged the corporate sector to behave in a particular fashion that led to the financial crisis.

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