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http://ssrn.com/abstract=2171355
 
 

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Value Creation and Value Capture in Corporate Governance: Using the Value-Based Approach to Analyze an Ownership Reform of China's Listed Firms


Nan Jia


University of Southern California - Marshall School of Business

Jing Shi


RMIT University - School of Economics, Finance and Marketing; Financial Research Network (FIRN)

Yongxiang Wang


University of Southern California - Marshall School of Business

November 5, 2012

Marshall School of Business Working Paper

Abstract:     
We have followed the value-based approach to investigate a major corporate governance reform affecting publically listed firms in China. The regulations required that, in each firm, the owners of non-tradable shares (block shareholders) negotiate with the owners of tradable shares (minority shareholders) to determine the compensation paid to the latter for allowing non-tradable shares to trade on the stock market. If such an agreement is not obtained, the firm is forbidden to use equity refinancing in the future. The present study emphasizes the joint effect of value creation and value capture in determining the level of compensation, and finds that firms that expect to generate higher returns from future investments but face greater constraints in seeking non-equity-based financing tend to issue higher levels of compensation. This joint effect is further moderated by factors related to investment returns and corporate governance. The empirical evidence lends strong support to theoretical predictions. This study has important implications for corporate governance in emerging markets, and the application of the value-based approach to corporate governance research in general.

Keywords: Value-Based Approach, Corporate Governance, Liquidity Reform, Bargaining, China

JEL Classification: L10, G30

working papers series


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Date posted: November 5, 2012  

Suggested Citation

Jia, Nan and Shi, Jing and Wang, Yongxiang, Value Creation and Value Capture in Corporate Governance: Using the Value-Based Approach to Analyze an Ownership Reform of China's Listed Firms (November 5, 2012). Marshall School of Business Working Paper. Available at SSRN: http://ssrn.com/abstract=2171355 or http://dx.doi.org/10.2139/ssrn.2171355

Contact Information

Nan Jia (Contact Author)
University of Southern California - Marshall School of Business ( email )
701 Exposition Blvd
Los Angeles, CA 90089
United States
Jing Shi
RMIT University - School of Economics, Finance and Marketing ( email )
Building 80
445 Swanston Street
Melbourne VIC, Melbourne 3000
Australia
Financial Research Network (FIRN) ( email )
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Yongxiang Wang
University of Southern California - Marshall School of Business ( email )
701 Exposition Blvd
Los Angeles, CA 90089
United States
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