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Does corporate governance matter in China?

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

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.

Suggested Citation

  • Cheung, Yan-Leung & Jiang, Ping & LIMPAPHAYOM, Piman & Lu, Tong, 2008. "Does corporate governance matter in China?," China Economic Review, Elsevier, vol. 19(3), pages 460-479, September.
    • Handle: RePEc:eee:chieco:v:19:y:2008:i:3:p:460-479
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    12. Liu, Ningyue & Laing, Elaine & Cao, Yue & Zhang, Xiaofei, 2018. "Institutional ownership and corporate transparency in China," Finance Research Letters, Elsevier, vol. 24(C), pages 328-336.
    13. 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.
    14. Gao, Lei & Kling, Gerhard, 2012. "The impact of corporate governance and external audit on compliance to mandatory disclosure requirements in China," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 21(1), pages 17-31.
    15. He, Yan & Chiu, Yung-ho & Zhang, Bin, 2015. "The impact of corporate governance on state-owned and non-state-owned firms efficiency in China," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 252-277.
    16. Gabe J. de Bondt & Tuomas A. Peltonen & Daniel Santabárbara, 2010. "Booms and busts in China's stock market: Estimates based on fundamentals," Working Papers 1032, Banco de España.
    17. Battaglia, Francesca & Gallo, Angela, 2015. "Risk governance and Asian bank performance: An empirical investigation over the financial crisis," Emerging Markets Review, Elsevier, vol. 25(C), pages 53-68.
    18. Maadi Bakor Omar & Azhar B Abdul Rahman & Fathilatul Zakimi bin Abdul Hamid, 2018. "The Association between Corporate Governance and Disclosure of Audit Committee Characteristics: A Conceptual Model for the Saudi Listed Companies," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(3), pages 325-335, July.
    19. Michail Nerantzidis, 2018. "The role of weighting in corporate governance ratings," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 22(3), pages 589-628, September.
    20. Gong, Qiang & Jacoby, Gady & Li, Shi & Lu, Lei, 2021. "Commonality in disagreement," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    21. Haß, Lars Helge & Vergauwe, Skrålan & Zhang, Qiyu, 2014. "Corporate governance and the information environment: Evidence from Chinese stock markets," International Review of Financial Analysis, Elsevier, vol. 36(C), pages 106-119.
    22. Sami, Heibatollah & Wang, Justin & Zhou, Haiyan, 2011. "Corporate governance and operating performance of Chinese listed firms," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 20(2), pages 106-114.
    23. Jack K. H. Fung & David Pecha, 2019. "The efficiency of compensation contracting in China: Do better CEOs get better paid?," Review of Quantitative Finance and Accounting, Springer, vol. 53(3), pages 749-772, October.
    24. T.R. Bishnoi & Sofia Devi Sh, 2015. "Corporate Governance and Performance of Foreign Firms in India," Indian Journal of Corporate Governance, , vol. 8(2), pages 137-152, December.

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