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Corporate governance effectiveness during institutional transition

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  • Lau, Chung-Ming
  • Fan, Dennis K.K.
  • Young, Michael N.
  • Wu, Shukun
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    Abstract

    Is corporate governance effective during the early stages of transition from central planning to market? If so, is the effectiveness due to the newly instituted reforms, or the remnants of the previous institutional regime? This study addresses these questions by drawing on agency theory and neo-institutional theory to examine the effectiveness of corporate governance during transition in the largest of the transition economies, the People's Republic of China. We choose a period of institutional upheaval--1998-2003--and test competing hypotheses with a sample of 416 publicly listed firms. We find strong evidence that poor-performing CEOs are more likely to leave or be dismissed which suggests that China's corporate governance was effective during this time period. However, the results also suggest that the effectiveness was likely due more to the remnants of the previous institutional regime than to the newly implemented Anglo-American style governance structures.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Business Review.

    Volume (Year): 16 (2007)
    Issue (Month): 4 (August)
    Pages: 425-448

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    Handle: RePEc:eee:iburev:v:16:y:2007:i:4:p:425-448

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    Keywords: Institutional transitions Corporate governance Enterprise reform China;

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    Cited by:
    1. Yunshi Liu & Linda Wang & Li Zhao & David Ahlstrom, 2013. "Board turnover in Taiwan’s public firms: An empirical study," Asia Pacific Journal of Management, Springer, vol. 30(4), pages 1059-1086, December.
    2. Adegbite, Emmanuel & Amaeshi, Kenneth & Nakajima, Chizu, 2013. "Multiple influences on corporate governance practice in Nigeria: Agents, strategies and implications," International Business Review, Elsevier, vol. 22(3), pages 524-538.
    3. Yuan Chen & Michael Young, 2010. "Cross-border mergers and acquisitions by Chinese listed companies: A principal–principal perspective," Asia Pacific Journal of Management, Springer, vol. 27(3), pages 523-539, September.
    4. Trien Le & Trevor Buck, 2011. "State ownership and listed firm performance: a universally negative governance relationship?," Journal of Management and Governance, Springer, vol. 15(2), pages 227-248, May.
    5. Stone, Zita & Filippaios, Fragkiskos & Stoian, Carmen, 2014. "Equity culture development in Central and Eastern Europe: The role of institutional and managerial factors," Research in International Business and Finance, Elsevier, vol. 31(C), pages 234-263.

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