We exploit parent- and subsidiary-level data for publicly listed firms in Thailand before, during, and after the 1997 Asian Financial Crisis to investigate the extent to which firms with different types of ownership restructure their business portfolios, in terms of divestitures and acquisitions. We compare restructuring choices made by firms mostly owned by (a) domestic individuals with block shares (family firms), (b) domestic firms and/or institutions (DI firms), and (c) foreign investors (foreign firms). We show that following the crisis (1) foreign firms' restructuring behavior is the least affected; (2) domestic firms owned by families and domestic institutions (DI) behave similarly to one another; (3) domestic firms do not increase divestiture in their peripheral segments to improve operational focus or to obtain cash in a credit crunch; they actually reduce divestiture in core segments; and (4) domestic firms also significantly reduce the acquisition of new subsidiaries. Our results challenge traditional explanations for divestiture such as corporate governance, operational refocus, and financial constraints. They indicate that in the great uncertainty of a crisis, domestic firms are able to hold onto their core assets to avoid fire-sale. In essence, they act more conservatively in churning their business portfolios.

Major customers in strong bargaining position can exert pressure on dependent suppliers and adversely affect their financing conditions. Consistent with this prediction, our analysis shows that the concentration of customer bases can enhance the bargaining power of downstream customers in supplier-customer interactions, leading to the significant deterioration of financing constraints for upstream firms. We then introduce a novel machine-learning approach to analyze the heterogeneous effect of customer concentration. This allows us to identify approximately 15 % of the firms, especially those small non-SOEs, as most vulnerable to customer concentration as the bargaining effect dominates.

One of the most important remaining issues in China's transition to a market economy is the reform of state-owned enterprises (SOE's). When reforms started in late 1978, SOE's dominated China's industrial sectors in every aspect. After 18 years of gradual transition, the SOE share in China's total industrial output has declined from 77.6 percent in 1978 to 28.8 percent in 1996. However, in 1996 SOE's still employed 57.4 percent of urban workers and possessed 52.2 percent of total investment in industrial fixed assets. Improving SOE performance is crucial for social stability and sustained growth in China. However, over 40 percent of SOE's are losing money. In this paper, we will argue that the root of the SOE problem is the separation of ownership and control and that the oftencriticized soft-budget constraints arise from various state-imposed policy burdens, which make the state accountable for the poor perfornance of SOE's. The key for a successful SOE reform is to remove the policy burdens and to create a level playing field so that market competition can provide sufficient information for the managerial performance of the SOE's and make the managers' incentives compatible with those of the state)' Io Competition and the Performance of Large Corporation in a Market Economy