Recapitalization of Thailand's banks after the 1997 crisis: Interpretation and critique from a neo-institutional perspective

Michael Tow Cheung*, Victor LIAO

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    1 Citation (Scopus)


    The recapitalization of Thailand's banks following the 1997 crisis is interpreted and positively criticized from the perspective of neo-institutional theory. Although a recapitalization scheme was introduced as part of monetary policy in 1998, the statistics and critical reaction on the part of private interests suggest that public resources and administrative action would not suffice to fully and expeditiously fulfill this task. To increase the supply of private capital to the banking sector the authorities can most effectively adopt a neo-institutional philosophy, under which policy credibility in situations of financial distress is enhanced by the clarification of property rights and minimization of opportunities for special-interest action. Neo-institutional theory also suggests that it is possible to expedite overall monetary recovery if the government concentrates on its comparative advantage in supplying the public good of financial stability, and leave commercial banks free to realize private comparative advantage in areas such as restructuring, re-engineering, mergers and competition. To link public and private action in the areas noted above, initiatives can be introduced to cooperatively exploit relative efficiency in obtaining and using information to support decision-making.

    Original languageEnglish
    Pages (from-to)411-427
    Number of pages17
    JournalAsia Pacific Business Review
    Issue number3
    Publication statusPublished - Sept 2005

    Scopus Subject Areas

    • Business and International Management

    User-Defined Keywords

    • 1997 financial crisis
    • Commercial banks
    • Neo-institutional policies
    • Property rights
    • Recapitalization
    • Thailand


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