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Does corporate governance matter in China?

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  • Cheung, Yan-Leung
  • Jiang, Ping
  • LIMPAPHAYOM, Piman
  • Lu, Tong
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    Abstract

    This study assesses the quality of corporate governance practices of Chinese listed companies in 2004. Based on the Revised OECD Principles of Corporate Governance [OECD, 2004. Principles of Corporate Governance, Organization of Economic Cooperation and Development.], we develop a corporate governance index (CGI) to measure the overall quality of corporate governance and disclosure practices of the 100 largest Chinese listed firms. The results show that some Chinese companies have been making progress in corporate governance reform. Specifically, there is a significant difference in the CGI of the top versus the bottom performing companies. Further, oversea-listed Chinese companies tend to show more regard for the role of stakeholders and disclosure and transparency than non-oversea-listed Chinese companies. However, further tests show that there is no statistically significant relation between the quality of corporate governance practices, as measured by the CGI, and market valuation among firms in the sample. It appears that, in 2004, the benefits of good corporate governance have not been fully incorporated into the market valuation of these Chinese companies.

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    Bibliographic Info

    Article provided by Elsevier in its journal China Economic Review.

    Volume (Year): 19 (2008)
    Issue (Month): 3 (September)
    Pages: 460-479

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    Handle: RePEc:eee:chieco:v:19:y:2008:i:3:p:460-479

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    Web page: http://www.elsevier.com/locate/chieco

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    Cited by:
    1. Mishra, Anil V. & Ratti, Ronald A., 2011. "Governance, monitoring and foreign investment in Chinese companies," Emerging Markets Review, Elsevier, vol. 12(2), pages 171-188, June.
    2. Cheung, Yan-Leung & Chung, Cheong-Wing & Tan, Weiqiang & Wang, Wenming, 2013. "Connected board of directors: A blessing or a curse?," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 3227-3242.
    3. Gabe de Bondt & Tuomas Peltonen & Daniel Santabarbara, 2011. "Booms and busts in China's stock market: estimates based on fundamentals," Applied Financial Economics, Taylor & Francis Journals, vol. 21(5), pages 287-300.
    4. Cheung, Yan-leung & OUYANG, Zhiwei & TAN, Weiqiang, 2009. "How regulatory changes affect IPO underpricing in China," China Economic Review, Elsevier, vol. 20(4), pages 692-702, December.

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