Following the 1997 Asian financial crisis, which is known as the South East Asian currency crisis or the Tom Yum Goong crisis, one that started in Thailand and hugely undermined the economies throughout the Asian region, it was clear that the SET became an important market for capital financing by the corporate sector. One of the main causes of the crisis was the rapid expansion of companies through high levels of debt and imprudent investment, which led to a large number of bankruptcies in Thailand. The outcome is closely linked to poor corporate governance practices and a weak legal environment. After the crisis, listed companies on the Thai stock markets were ordered to comply with a base standard of corporate governance, for example the “Code of Best Practices for Directors of Listed Companies” in 1999, the “Compass for Good Corporate Governance” in 2002 and “The Principle of Good Corporate Governance” in 2006. The emergence of the basic standard of corporate governance led to higher levels of corporate responsibility being established in a number of dimensions. These included, but were not limited to, the rights of shareholders, disclosure and transparency, and the role of stakeholders. Although companies are now required to comply with these obligations and disclose all necessary information, the Thai corporate governance code is designed to adhere to a “comply or explain” basis thereby compelling firms to explain in the annual report when they cannot meet the code’s requirements. Despite the reforms, the level of investor protection and corporate governance still remains low and there is a high degree of information asymmetry observed in the Thai stock market.
References
SEC, 2017. CG Thailand for sustainability of business and society. URL https://www.sec.or.th/cgthailand/en/pages/cgcode/cgcodeintroduction.aspx