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Corporate Governance in China: Current Practices, Economic Effects and Institutional Determinants

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  • Qiao Liu

Abstract

This article provides a preliminary survey of the burgeoning literature on the Chinese listed firms' corporate governance. We structure the existing research around three themes: (1) What are the current corporate governance practices in China? (2) How do these corporate governance practices affect the Chinese listed firms' valuation and various corporate decisions? (3) How does China's unique institutional setting pre-determine the governance model adopted in China? The evidence indicates that the current governance practice adopted in China can be best described as a control-based model, which contrasts strikingly with the market-oriented model commonly used in the US and UK, and championed by most corporate governance advocates. The evidence also shows that Chinese firms, whose corporate governance practices deviate from the control-based model, demonstrate stronger performance, and tend to make decisions in line with the shareholders' interest. The evidence from the literature also suggests that the control-based model is rooted in the 'administrative governance' approach adopted by the Chinese regulatory authorities, and is tailed to China's specific institutional setting. (JEL classification: G3) Copyright 2006, Oxford University Press.

Suggested Citation

  • Qiao Liu, 2006. "Corporate Governance in China: Current Practices, Economic Effects and Institutional Determinants," CESifo Economic Studies, CESifo, vol. 52(2), pages 415-453, June.
  • Handle: RePEc:oup:cesifo:v:52:y:2006:i:2:p:415-453
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    File URL: http://hdl.handle.net/10.1093/cesifo/ifl001
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    Cited by:

    1. Sihai Li & Xianzhong Song & Huiying Wu, 2015. "Political Connection, Ownership Structure, and Corporate Philanthropy in China: A Strategic-Political Perspective," Journal of Business Ethics, Springer, vol. 129(2), pages 399-411, June.
    2. Can An & Xiaofei Pan & Gary Tian, 2016. "How Does Corporate Governance Affect Loan Collateral? Evidence from Chinese SOEs and Non-SOEs," International Review of Finance, International Review of Finance Ltd., vol. 16(3), pages 325-356, September.
    3. Fleming, Damon M. & Chow, Chee W. & Chen, Gongmeng, 2009. "Strategy, performance-measurement systems, and performance: A study of Chinese firms," The International Journal of Accounting, Elsevier, vol. 44(3), pages 256-278, September.
    4. Ahrens, Joachim & Jünemann, Patrick, 2010. "Transitional institutions, institutional complementarities and economic performance in China: A 'Varieties of Capitalism' approach," Discourses in Social Market Economy 2010-11, OrdnungsPolitisches Portal (OPO).
    5. Zhong, Ninghua, 2015. "Corporate governance of Chinese privatized firms: Evidence from a survey of non-listed enterprises," Journal of Comparative Economics, Elsevier, vol. 43(4), pages 1101-1121.
    6. Chen, Shouming & Bu, Miao & Wu, Sibin & Liang, Xin, 2015. "How does TMT attention to innovation of Chinese firms influence firm innovation activities? A study on the moderating role of corporate governance," Journal of Business Research, Elsevier, vol. 68(5), pages 1127-1135.
    7. Liu, Qiao & Lu, Zhou (Joe), 2007. "Corporate governance and earnings management in the Chinese listed companies: A tunneling perspective," Journal of Corporate Finance, Elsevier, vol. 13(5), pages 881-906, December.
    8. Jiang, Guohua & Lee, Charles M.C. & Yue, Heng, 2010. "Tunneling through intercorporate loans: The China experience," Journal of Financial Economics, Elsevier, vol. 98(1), pages 1-20, October.
    9. 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.
    10. Jane Nolan, 2010. "The influence of western banks on corporate governance in China," Asia Pacific Business Review, Taylor & Francis Journals, vol. 16(3), pages 417-436, July.
    11. repec:eee:pacfin:v:46:y:2017:i:pa:p:124-140 is not listed on IDEAS
    12. Lili Pi & Julian Lowe, 2011. "Can a powerful CEO avoid involuntary replacement?—An empirical study from China," Asia Pacific Journal of Management, Springer, vol. 28(4), pages 775-805, December.
    13. Ninghua Zhong & Shujing Wang & Rudai Yang, 2017. "Does Corporate Governance Enhance Common Interests of Shareholders and Primary Stakeholders?," Journal of Business Ethics, Springer, vol. 141(2), pages 411-431, March.
    14. Liu, Chunyan & Uchida, Konari & Yang, Yufeng, 2012. "Corporate governance and firm value during the global financial crisis: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 21(C), pages 70-80.
    15. repec:spr:manint:v:53:y:2013:i:1:d:10.1007_s11575-012-0164-x is not listed on IDEAS
    16. Xingqiang Du, 2014. "Does Religion Mitigate Tunneling? Evidence from Chinese Buddhism," Journal of Business Ethics, Springer, vol. 125(2), pages 299-327, December.
    17. repec:kap:jbuset:v:147:y:2018:i:3:d:10.1007_s10551-015-2986-5 is not listed on IDEAS
    18. Adegbite, Emmanuel, 2015. "Good corporate governance in Nigeria: Antecedents, propositions and peculiarities," International Business Review, Elsevier, vol. 24(2), pages 319-330.

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    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance

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