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State Common Ownership and Bank Governance: Evidence from CEO Turnovers in China

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  • Qing He
  • Dongxu Li

Abstract

Using hand-collected data of bank loans and CEO turnovers in China, we investigate whether common ownership compromises creditors’ governance role when borrowers underperform. Unlike prior literature on the overall lack of bank monitoring on state-owned enterprises (SOEs) in China, we argue that such governance inefficiency exists only among the lending relationships where the bank and the firm are ultimately owned by the same government agency (i.e., state common ownership). The effects are greater for the firms with a board director from the lending bank, with ownership in the bank’s shares, and with political connections. Overall, this paper revisits the functions of state-owned business groups in emerging markets.

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  • Qing He & Dongxu Li, 2023. "State Common Ownership and Bank Governance: Evidence from CEO Turnovers in China," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(1), pages 170-191, January.
    • Handle: RePEc:mes:emfitr:v:59:y:2023:i:1:p:170-191
    DOI: 10.1080/1540496X.2022.2088349
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    Cited by:

    1. Li, Quan & Sun, Haodan & Tao, Yunqing & Ye, Yongwei & Zhan, Kaiyan, 2023. "The fault-tolerant and error-correction mechanism and capital allocation efficiency of state-owned Enterprises in China," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).

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