Asian Eclipse: Exposing the Dark Side of Business in Asia

Backman, a business analyst who had worked in the region, wrote this after the 1997 Asian financial crisis to argue that the crisis exposed corporate governance and business practice problems that had been present throughout the growth period.

His catalogue covers the specific mechanisms. Family conglomerates controlled listed companies through pyramid structures and cross-shareholdings, so a family could control a group with a small fraction of the economic interest, which created an incentive to move value from companies where their stake was small to those where it was large. Related-party transactions moved assets and cash between group companies at prices no arm's length party would accept. Accounting and disclosure standards were weak and audit was unreliable. Banks lent to companies connected to their owners. Political connections determined who received licences, contracts and credit, which meant the return on political relationships exceeded the return on operating performance.

He examines these across countries: the Indonesian conglomerates under Suharto, Malaysian corporate structures and the political connections behind them, Korean chaebol governance and their debt levels, Thai finance companies, and the overseas Chinese business networks that operated across borders on personal relationships.

Backman argues that these arrangements were not incidental to the growth model but part of it, and that the crisis was their consequence rather than an external shock.

The book is sharply written and was well received when published. It generalises across very different countries, and its treatment of ethnic Chinese business networks has been criticised for essentialism. Corporate governance in several of these markets improved substantially after the crisis, with Korea in particular changing chaebol disclosure and debt practices, so parts of the analysis describe a period rather than a permanent condition.