Corporate governance in China
This thesis addresses some important issues in corporate governance usingdata from Chinese stock markets. The thesis starts with a summary of relevantresearch in the area of corporate governance. Next, I describe the historicdevelopment of corporate governance in China and the corporate governanceframework that is currently in place. These two introductory chapters are followed bymy empirical research, which comprises three chapters.First, I analyse share price reactions and top-management turnover aroundannouncements of negotiated block transfers between different State-ownershipstructures for a sample of State-controlled firms that are publicly traded on Chinesestock exchanges. I find that changes in firm value and CEO turnover are much greaterwhen a government agency (GA) transfers a block of shares of a listed firm to a statecontrolledenterprise with a private joint venture partner (LPSOE) rather than to asolely state owned enterprise (SSOE).Second, using a sample of listed firms that issued debt guarantees to their largeshareholders, I analyse the relation between firm- and ownership characteristics andthe probability of expropriation of minority shareholders by controlling shareholders.I also analyse and validate the assumed relationship between ‘tunnelling’ and severalfinancial measures of expropriation suggested in the literature. I find that, in a weaklegal environment such as China, the issuance of related guarantees is more likely atfirms with large private blockholders than at firms with the State as the largestblockholder, and that related guarantees are more likely at larger firms and firms witha single controlling blockholder. I also find that firms that issued related loanguarantees have significantly lower industry-adjusted measures of Tobin’s Q, profitability, and dividend yields and have significantly higher leverage. Thisevidence is consistent with the hypothesis that tunnelling by controlling shareholderscan be very costly to minority shareholders. I find no evidence of higher bid askspreads for firms that issued related guarantees.Finally, I study the monitoring role of blockholders in China as an alternativemechanism of corporate governance that might result in reduced expropriation of firmassets by the controlling blockholder. I find that non-controlling block holderscontribute to firm value only when their ultimate owners are different from thecontrolling blockholder in terms of the public/private distinction. I attribute this resultto the potential conflict of interests between controlling and non-controlling blockholders in this case, reducing the opportunities to tunnel and improving monitoring ofmanagement. I also provide evidence of a substantial valuation discount if there areclear signals that suggest collusion between blockholders.
Year of publication: |
2004
|
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Authors: | Fu, Jiang |
Other Persons: | Henk Berkman (contributor) |
Publisher: |
Auckland |
Saved in:
freely available
Saved in favorites
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