Internal Governance Mechanisms and Firm Performance in China
39 Pages Posted: 22 Jan 2009
Date Written: January 15, 2009
Abstract
Corporate governance issues arising from concentrated ownership structure in emerging economies have received growing attention. Adopting a principal-principal perspective, this paper employs structural equation modeling to evaluate the independent and interdependent effects of internal governance mechanisms in enhancing firms' value in China. Based on a three-year dataset covering 304 publicly listed companies over 2003-05, our findings suggest that ownership concentration has the most significant governance effect and has impacted negatively on firm performance. Furthermore, the governance role of the board of directors and supervisory boards is found to have been hindered by ownership concentration, rendering them unable to improve firm performance at present.
Keywords: corporate governance, internal governance mechanisms, ownership concentration, controlling shareholder, board of directors, supervisory board
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