A personal perspective on protecting investors of publicly listed Chinese firms

The objective of this paper is to provide a personal perspective on how to protect investors of publicly listed Chinese firms. The key points of my discussion can be summarized as follows. First, I describe China’s investor protection problems and then discuss the importance of investor protection in China. This discussion raises the possibility that strong investor protection may not be a necessary condition for a nation’s economic prosperity. Second, I propose a conceptual framework that I argue all stakeholders should use when judging the superiority of alternative investor protection mechanisms. Third, I analyze the challenges and opportunities for academic researchers interested in studying China’s investor protection. I highlight the difficulty of drawing causal inferences from observed data, the difficulty of quantifying all costs and benefits of regulatory reforms, and the difficulty of China’s unique institutional environment, which may call for investor protection mechanisms with Chinese characteristics. I also identify exciting new research opportunities that China presents to corporate governance researchers.