Corporate Governance In China Research Articles

The Evergrande Story: A Look into Chinese Corporate Law and the Redefinition of Privately Owned Enterprises and Their Relationship to State-Owned Enterprises in the Chinese Economy

Abstract In December 2021, Evergrande, the second-largest private property developer in China, defaulted on its debt and became the most indebted firm in the world with over $300 billion in liabilities. Its default marked the beginning of a real estate crisis in China, one that is still in the process of being resolved. The Chinese State, through its State-owned enterprises (SOEs), has played an enormous role in mitigating the crisis. Had it not, it is very unlikely that Evergrande would remain in existence today, with huge ramifications for Chinese society and the national economy. This article undertakes a case study of Evergrande, a privately owned enterprise (POE) that exhibits SOE characteristics, to shed further light on the web of interactions between large enterprises in China. It reconsiders how ‘private’ some POEs are in the Chinese economy and argues that, at a certain level, both SOEs and POEs operate in a co-dependent manner. Not only does this challenge the conventional distinction between SOEs and POEs, but it also has wide-ranging implications for corporate governance in China. Indeed, SOEs find themselves having to bail out POEs and are exerting control over POEs in which they have no equity stake. SOEs are thus financially burdened with protecting all large enterprises including POEs, whereas POEs can operate in an unregulated fashion and receive rents from their close ties to SOEs. Altogether, this article’s analysis showcases the operation of various themes of Chinese corporate governance and contributes to the existing literature seeking to understand the unique role of the State in Chinese enterprises.

Institutional Investor Information Competition and Accounting Information Transparency: Implications for Financial Markets and Corporate Governance in China

Institutional Investor Information Competition and Accounting Information Transparency: Implications for Financial Markets and Corporate Governance in China

Is this Sustainability Development Framework Motivation to a Multi-National Enterprise?: Attesting Corporate Governance in China

Background and Aim: The global economic crisis highlights the importance of corporate governance in large enterprises for profit protection and sustainable development. China faces challenges in implementing this framework, focusing on efficiency, effectiveness, and regulatory mechanisms. Materials and Methods: This paper is an academic paper. The author has collated and analyzed the various aspects of the notion of corporate governance, ranking the most significant aspects in descending order. Results: Sustainable business management in large enterprises in China involves corporate governance across five dimensions: structure, process, ethics, competence, wisdom, eco-efficiency, and sustainability report. This approach creates long-term added value for owners and shareholders by managing risk in economic, social, and environmental dimensions. Organizations must adapt strategies and work systems to maintain a competitive advantage and meet stakeholder needs. Conclusion: Sustainable business management in China involves corporate governance across five dimensions, focusing on structure, process, ethics, competence, wisdom, eco-efficiency, and sustainability report, ensuring long-term value and meeting stakeholder needs. China’s large enterprises provide high returns, contribute to society, and foster trust, transparency, and economic, social, and environmental dimensions, benefiting China’s future.

Does minority shareholder activism enhance corporate innovation? Evidence from China

Minority shareholder activism (MSA) on online interactive platforms is a novel form of corporate governance in China. This paper investigates whether, and how, innovation-related minority shareholder activism affects corporate innovation. We find that MSA is significantly positively related to firms’ future innovation output. We establish a causal relationship between MSA and future innovation output using both instrumental variable and propensity score matching approaches. We further find that MSA's governance effect on innovation is consistent with career concerns rather than the quiet life hypothesis. Additionally, we find that MSA's effects substitute for institutional investor activism's effects.

Corporate governance and the outward foreign direct investment: Firm-level evidence from China

This paper investigates the role of corporate governance in China’s outward foreign direct investment (ODI) using a sample of Chinese public firms over the period 2009–2015. Different from previous studies, which mainly use country-level aggregate data to examine China’s ODI behavior, this study utilizes firm-level data to explore the impact of corporate governance on firms’ ODI decision making. Building on the integration of agency theory and foreign direct investment theories, the study finds that ownership concentration, share ownership, and executive compensation significantly influence China’s ODI flows in both full-sample and sub-sample estimations. The corporate governance has an essential effect on firms’ ODI flows in that the firms with better corporate governance are more interested in undertaking ODI projects. The results are robust across different sample periods and in both state-owned and non-state-owned firm sub-groups. The government may design some policies such as friendly tax regulations to stimulate private firms to invest overseas.

Can directors’ and officers’ liability insurance improve corporate ESG performance?

Directors’ and Officers’ liability insurance (abbreviated as “D&O insurance”) was born in the United States in the 1930s and has been widely used in Western countries. In contrast, China introduced D&O insurance in 2002, and its development has been relatively slow. With the revision and improvement of Chinese regulatory laws and regulations, such as the new Securities Law in March 2020, which further regulates the obligations and responsibilities of corporate management, and increases the penalties for information disclosure violations of listed companies, the risk to directors and executives performing their duties is promoted. This makes D&O insurance the focus of China’s capital market, with huge potential for future development. Therefore, it is of urgent practical importance to study the impact of director liability insurance on corporate governance in China. At the same time, D&O insurance, as an effective risk management mechanism, has not yet reached a unified conclusion in the academic circles on its corporate governance effectiveness. On the one hand, D&O insurance may encourage directors and senior executives to be proactive to enhance the company’s market value by taking risks, and on the other hand, it may induce opportunistic behavior of managers and reduce the company’s value. Under the new development form, analyzing and researching the governance effect of D&O insurance from different angles will help to provide a theoretical basis for its further development and popularization in China’s capital market. Thus, using a sample of Chinese A-share listed companies from 2011 to 2020, this study investigates the impact of D&O insurance on corporate ESG performance. The results show that D&O insurance significantly improves corporate ESG performance. Additional analysis suggests that the contribution of D&O insurance to ESG performance is achieved by improving independent director function-performing effectiveness and increasing corporate risk-taking. The findings of this paper have policy implications for a better understanding of the governance role of D&O insurance, encouraging companies to improve corporate ESG performance.

Political Party System and Enterprise Innovation: Is China Different?

ABSTRACT A significant feature of corporate governance in China is the participation of party organizations, reflecting the involvement of the Chinese political party system in enterprises. Using a sample of A-share market listed central state government owned enterprises (hereinafter referred to as “CSOEs”) from 2003 to 2020, this study examines the influence of China’s political party system and state-owned assets supervision system on enterprise innovation. The empirical results show that the participation of party organizations in corporate governance can significantly promote CSOEs’ innovation, especially in the case of CSOEs with weak state-owned assets supervision. The party organization’s role in promoting innovation is mainly achieved through the board of directors and senior management, rather than through the cooperation of the board of supervisors. We also find that this role exists in both substantive and strategic innovations, but mainly exists in areas with weak market allocation resources. Our findings contribute to the literature examining the determinants of firm innovation, and have practical implications for corporate governance in developing countries.

Analysis on Corporate Governance of State-owned Enterprises

Corporate system has become one of the most important forms of economic organization in the modern enterprise system under the condition of market economy. Whether the corporate governance structure is perfect or not plays a decisive role in the normal operation and development of the economy. So far, the reform of state-owned enterprises has lasted for nearly 40 years, and the reform has made great achievements, but there is still a certain distance from the reform goal. The corporate governance problems of state-owned enterprises lead to the rights of state-owned enterprises cannot be fully realized and guaranteed. The Realistic Dilemma of Corporate Governance in China appears. This paper discusses the market disadvantages in the operation of state-owned property rights, the governance structure of state-owned enterprises, and the existing problems of state-owned enterprises, and how to overcome these disadvantages.

The Politicization of Corporate Governance: A Viable Alternative?

Abstract It is now well-established that different markets may develop different growth-supporting institutions that can give rise to public firms and set capital markets in motion. Yet, the paradigm view still holds local alternatives as merely stepping stones, a transitional passage toward achieving a deeper and more advanced market, at which point conventional legal and market institutions—modeled on Anglo-American corporate capitalism—are still held necessary. Four decades of economic development in China challenge these conventions. With modern firms with global prominence and a capital market that is the second largest in the world, corporate governance in China seems to have passed the point of an “adjust or perish” prognostic. The system that governs Chinese firms and the ways in which capital markets function sustain strong governance attributes that go against many fundamentals in economics and legal thought. Political involvement and state ownership, both assumed to stand in the way of capital market growth, remain prevalent while the market continues to advance. Most strikingly, harmonization with conventional corporate governance been pushed aside as the Chinese Communist Party has decided to exercise an ever-more expansive and direct role in market activity. Public firms in present-day China are increasingly being governed by a “politicized corporate governance.” Political institutions with corporate governance capacities have been deployed both inside and outside firms. These institutions now buttress or even replace weaker traditional corporate governance mechanisms in the Chinese market. The implications are striking. First, despite justified reasons for alarm, a politicized corporate governance system in China can perform the main functions of corporate governance elsewhere, thereby offering some benefits for public firms and their stockholders. Second, these developments show how path-dependent corporate governance attributes, here political institutions, reject convergence predictions yet have enough plasticity to evolve and to support modern firms and markets beyond assumed thresholds and developmental milestones. In so doing, China’s politicized corporate governance casts doubts on law and development conventions as well as on both sides of a long-standing governance convergence debate. Finally, the politicization of corporate governance in China offers a new direction in comparative corporate governance scholarship, providing evidence of an instituted reversal from outwardly convergent corporate governance toward a new form of a planned economy.

Hybrydowy model zarządzania w chińskich przedsiębiorstwach

The dynamic development of Chinese enterprises in the last two decades means that increasingly often, Chinese companies have been expanding their own specific corporate culture and management methods. The article discusses the differences in the attitudes of managers, business strategies as well as the Chinese definitions and visions of what an enterprise is to serve, what are its goals, strategies and forms of operation. In the article, we analyze Chinese and external – Western factors which influence the management and organization of work in China, arguing that the Chinese management model may be described as a hybrid, in view of the variety of sources on which its principles are based. The first part of the article deals with the philosophical foundations and management considerations in traditional China, referring to the main currents of the Chinese philosophical thought, Confucianism, Legism and Daoism. The second part describes the implications of Chinese philosophy in management; the practice of networking and how the characteristics of Chinese society affect corporate governance in China. Part three is devoted to human resources and to the way social needs of Chinese workers are met.The Chinese society is examined in the context of management. The last part of the article describes enterprises in the People’s Republic of China, their special relationship with the State and how it is understood in the context of management.

CURRENT STATUS AND TRENDS OF CORPORATE GOVERNANCE RESEARCH IN CHINA

This article introduces the development process, important time nodes and important events of Chinese corporate governance. Based on the search results of the CNKI database, the number of annual publications, research institutions, and keywords are counted, showing the current research status. Then it shows the main content of the current research and looks forward to the future research trend of corporate governance in China.

Employee participation in corporate governance of Chinese companies: A comparative aspect

The development of the stakeholder theory is one of the global trends in corporate governance. This article examines the problems of employee participation in corporate governance in accordance with the current legislation of the PRC and assesses the rationality of the chosen path of employee participation in corporate governance in China by conducting a comparative analysis with Germany and the United States. The author believes that due to the difference in historical origin and legislative basis, as well as taking into account structure-driven path dependence and rule-driven path dependence effects, from the point of view of legal regulation, a unique model of employee participation in corporate governance has formed in China. In addition, the mechanism of employee participation in corporate governance by the current legislation of China is generally suitable for the national conditions of China. In addition, the author makes suggestions for improving the mechanism of employee participation in corporate governance in China. Having studied the state of Russian legislation in comparison with China and other countries, the author suggests several issues that require special attention from the Russian legislator on this matter. It is noted that the study of the experience of legal regulation of employee participation in corporate governance in China will help in the development and amendment of further legislative provisions to regulate this issue in Russia, in order to advance towards better ideals of cooperation between workers and employers. Specifically, in the long term, the Russian legislator can also normatively secure employee participation in the development and adoption of managerial decisions in an appropriate form.

Understanding Corporate Governance in China, by Bob Tricker and Gregg Li. Hong Kong: Hong Kong University Press, 2019. xii+310 pp. US$50.00 (paper).

Previous articleNext article No AccessReviewsUnderstanding Corporate Governance in China, by Bob Tricker and Gregg Li. Hong Kong: Hong Kong University Press, 2019. xii+310 pp. US$50.00 (paper).Peter J. PeverelliPeter J. PeverelliVrije Universiteit Amsterdam Search for more articles by this author PDFPDF PLUSFull Text Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by The China Journal Volume 85January 2021 Published on behalf of the Australian Centre on China in the World at the Australian National University Article DOIhttps://doi.org/10.1086/711542 Views: 74Total views on this site For permission to reuse, please contact [email protected]PDF download Crossref reports no articles citing this article.

Empirical Insights into Supervisory Boards of Listed Companies in China

This paper addresses a gap in the literature by presenting novel empirical insight, accorded by privileged access to prejudications and legal decisions, into corporate governance in China. A main aim of our work was to assess whether calls for reform of the regulatory system are warranted. We present an inductive piece of research into two-tier boards in Chinese listed companies, incorporating a board of directors and a supervisory board, appointed by and reporting to the shareholders’ meeting. Through unique primary-source evidence, and additional evidence from recent legal cases, we illustrate the problems faced by organizations that have had to contend with the inherent difficulties of corporate governance in China. Our findings suggest that the supervisory board, in practice, has limited power, given the conflicting roles of the various members, and that corporate governance might be better maintained by a greater transfer of power to independent directors.

An Empirical Research About Corporate Governance on Enterprise Innovation

Enterprise innovation is the core driving force of national development. As the core of the modern enterprise system, corporate governance has a significant impact on enterprise innovation. Through particularizing the issue of corporate governance and then analyzing thoroughly about the interaction between the structure of corporate governance and the level of enterprise innovation by means of the method of empirical research , the article aims to ascertain the critical factors in the mode of corporate governance which have an impact on the level of enterprise innovation, thereby providing the relative references for the reform of corporate governance in China and promotion of enterprise innovation.

Effects of Career Horizon and Corporate Governance in China’s Construction Industry: Multilevel Study of Top Management Fraud

AbstractTo investigate the drivers of fraudulent behavior in the construction industry, this study focused on top managers and explored whether individual-level and firm-level characteristics would...

The Politicization of Corporate Governance - A Viable Alternative?

It is now well-established that different markets may develop different growth-supporting institutions that can give rise to public firms and set capital markets in motion. Yet, the paradigm view still holds local alternatives as merely stepping-stones, a transitional passage toward achieving a deeper and more advanced market, at which point conventional legal and market institutions — modeled on Anglo-American corporate capitalism — are still held necessary. Four decades of economic development in China challenge these conventions. With modern firms with global prominence and a capital market that is the second largest in the world, corporate governance in China seems to have passed the point of an “adjust or perish” prognostic. The system that governs these Chinese firms, and the ways in which capital markets function, sustain strong governance attributes that go against many fundamentals in economics and legal thought. Political involvement and state ownership, both assumed to stand in the way of capital market growth, remain prevalent while the market continues to advance. Most strikingly, harmonization with conventional corporate governance has been pushed aside as the Chinese Communist Party decided to exercise an ever more expansive and direct role in market activity. Public firms in present-day China are increasingly being governed by a “politicized corporate governance.” Political institutions with corporate governance capacities have been deployed both inside and outside firms. These institutions now buttress or even replace weaker traditional corporate governance mechanisms in the Chinese market. The implications are striking. First, despite justified reasons for alarm, a politicized corporate governance system in China can perform the main functions of corporate governance elsewhere, thereby offering relative benefits for public firms and their stockholders. Second, these developments show how path-dependent institutional substitutes, here political institutions, reject convergence predictions yet have enough plasticity to evolve and to support modern firms and prosperous markets beyond assumed thresholds and developmental milestones. In so doing, China’s politicized corporate governance casts doubts on law and development conventions as well as on both sides of a long-standing convergence debate. Finally, the politicization of corporate governance offers a new direction in comparative corporate governance scholarship, providing evidence of an instituted reversal from outwardly conventional corporate governance toward a new form of a planned economy.

Corporate Governance in China: A Survey*

AbstractThis article surveys corporate governance in China, as described in a growing literature published in top journals. Unlike the classical vertical agency problems in Western countries, the dominant agency problem in China is the horizontal agency conflict between controlling and minority shareholders arising from concentrated ownership structure; thus one cannot automatically apply what is known about the USA to China. As these features are also prevalent in many other countries, insights from this survey can also be applied to countries far beyond China. We start by describing controlling shareholder and agency problems in China, and then discuss how law and institutions are particularly important for China, where controlling shareholders have great power. As state-owned enterprises have their own features, we separately discuss their corporate governance. We also briefly discuss corporate social responsibility in China. Finally, we provide an agenda for future research.

Corporate Governance in China: A Survey

This paper surveys corporate governance in China, as described in a growing literature published in top journals. Unlike the classical vertical agency problems in Western countries, the dominant agency problem in China is the horizontal agency conflict between controlling and minority shareholders arising from concentrated ownership structure; thus one cannot automatically apply what is known about the U.S. to China. As these features are also prevalent in many other countries, insights from this survey can also be applied to countries far beyond China. We start by describing controlling shareholder and agency problems in China, and then discuss how law and institutions are particularly important for China, where controlling shareholders have great power. As state-owned enterprises have their own features, we separately discuss their corporate governance. We also briefly discuss corporate social responsibility in China. Finally, we provide an agenda for future research.

Revisiting Executive Pay, Firm Performance, and Corporate Governance in China

Revisiting Executive Pay, Firm Performance, and Corporate Governance in China