Exploring the Effects of China's Two-Tier Board System and Ownership Structure on Firm Performance and Earnings Informativeness

Abstract

This study empirically explores whether, and how, selected attributes of China's two-tier board system affect Chinese firms' performance and earnings informativeness. Using a data base of 4623 firm-year observations over the 1999 to 2003 period, we find some effects that mirror ones reported in non-Chinese settings, such as positive correlations between firm performance and the proportion of independent Board of Directors (BoD) members and the frequency of Supervisory Committee (SC) meetings; as well as positive correlations between earnings informativeness and the proportions of independent BoD and SC members. Significant effects also are found for concentrated non-state ownership and existence of foreign shareholders. These exploratory findings provide impetus for further research in the Chinese setting, the findings of which may help refine general knowledge on the role of corporate governance.