Can Internal Governance Mechanisms Prevent Asset Appropriation? Examination of Type I Tunneling in China
38 Pages Posted: 12 Jan 2012
Date Written: January 9, 2012
Using a sample of 117 Chinese listed companies with a total of 540 firm-year observations during the important period of regulatory change and organizational reform between 2001 and 2005, this study aims to investigate whether Type I tunneling is affected by the internal governance mechanisms (IGMs) from the perspective of principal-principal (P-P) conflict between controlling shareholders and minority shareholders. Our findings suggest that state ownership and board of directors‟ meeting are positively correlated with direct transferring of Type I tunneling, but size of board of directors and number of independent directors reveal a negative association. Other IGMs including foreign ownership, supervisory board size, number of professional supervisors and supervisory board meeting were found to have no impact.
Keywords: Type I tunneling, internal governance mechanisms, corporate governance, China
JEL Classification: G34, M41, L25
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