Abstract
This paper studies whether the market can recognize the value of corporate governance mechanisms (ownership structure, board structure, and managerial incentives) of Chinese listed companies. We find that when companies are faced with “black swan” events, such as COVID-19, non-state-owned enterprise are found to be more valuable, that is, the stock price of non-state-owned enterprises are more immune to the negative shocks of COVID-19. For board structure, the arrangement of the duality of chairman and CEO is found to be more valuable and can effectively alleviate the negative shocks of the epidemic on the stock price. For managerial incentives mechanisms, it shows that management shareholding, management compensation, and executive stock options are all effective mechanisms and can better withstand the negative shocks of the COVID-19 epidemic on the stock price of companies. This paper sheds light on the value of corporate governance mechanisms in the Chinese capital market from the perspective of investors, which enriches literature in the field of corporate governance.
Highlights
The Coronavirus Disease-2019 (COVID-19) epidemic in 2020 as the “black swan” exogenous event severely endangered the lives and health of the people and had a serious impact on the capital market
Based on a sample of Chinese listed firms, this paper finds that the pandemic-induced drop in stock prices was milder among firms with (a) non-SOEs, (b) Chairman and CEO duality, (c) higher managerial compensation, but ownership concentration, multiple blockholders, the board size, board independence, and board gender diversity have no significant effect on mitigating the negative impact of the epidemic on stock prices
We assess the differential sensitivity of stock price reactions to COVID-19 as a function of firms’ pre-existing levels of ownership structure
Summary
The Coronavirus Disease-2019 (COVID-19) epidemic in 2020 as the “black swan” exogenous event severely endangered the lives and health of the people and had a serious impact on the capital market. Chinese listed firms during the first two quarters of 2020, we consider three important aspects of corporate governance mechanisms: [1] ownership structure, such as ownership concentration, multiple blockholders, and nature of ownership, [2] board structure, such as board size, board independence, board gender diversity, and the duality of Chairman and CEO, [3] managerial incentives, such as managerial ownership, managerial compensation, and executive stock options. Based on a sample of Chinese listed firms, this paper finds that the pandemic-induced drop in stock prices was milder among firms with (a) non-SOEs, (b) Chairman and CEO duality, (c) higher managerial compensation, but ownership concentration, multiple blockholders, the board size, board independence, and board gender diversity have no significant effect on mitigating the negative impact of the epidemic on stock prices. The average shareholding ratio of the largest shareholder is 33.08%, the descriptive statistical results of other variables will not be repeated here
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