High levels of corporate debt contributed to the severity of the Asian financial crisis in 1997-98. Many Asian companies were more highly indebted and had a greater proportion of short-term debt than their counterparts elsewhere in the world. As a result, even a small shock to the macroeconomy was enough to push them into insolvency. Companies with more debt suffered larger falls in stock prices (Mitton 2001), and countries with more corporate debt suffered larger falls in output during the crisis (Kim and Stone, 1999). Why did the Asian private sector choose to have so much debt?