The Role of Hong Kong's Financial Regulations in Improving Corporate Governance Standards in China: Lessons from the Panama Papers for Hong Kong

106 Pages Posted: 10 Feb 2017 Last revised: 10 Mar 2017

Bryane Michael

University of Hong Kong Faculty of Law; University of Oxford

Say Hak Goo

The University of Hong Kong - Faculty of Law

Date Written: November 1, 2016

Abstract

Hong Kong contributes to poor corporate governance on the Mainland. Could regulatory reform in Hong Kong help improve corporate governance standards/practices (and thus firm value) on the Mainland? In this paper, we discuss ways to incentivize Mainland firms to improve their corporate governance by adopting numerous market-value increasing reforms in Hong Kong. These include the limited extra-territorial application of corporate governance provisions, changes to the Listing Rules to ‘contract’ for better corporate governance, and incentives to collect better corporate governance data. Other reforms include increasing financial transparency (particularly about corporate ownership and control), reducing financial firms’ incentives to trade in shell corporations, regulating relationships with tax havens, and encouraging the redrafting of China’s 2002 Code of Corporate Governance. We provide 31 recommendations and estimate that these recommendations can increase market values on the Mainland by 7% (or in value of roughly $330 billion), while improving the value-added of Hong Kong’s own incorporation/corporate services companies.

Keywords: Chinese corporate governance, extra-territoriality, Hong Kong, Listing Rules

JEL Classification: G34, N25, M14

Suggested Citation

Michael, Bryane and Goo, Say Hak, The Role of Hong Kong's Financial Regulations in Improving Corporate Governance Standards in China: Lessons from the Panama Papers for Hong Kong (November 1, 2016). University of Hong Kong Faculty of Law Research Paper No. 2016/048. Available at SSRN: https://ssrn.com/abstract=2914865 or http://dx.doi.org/10.2139/ssrn.2914865

Bryane Michael (Contact Author)

University of Hong Kong Faculty of Law ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

HOME PAGE: http://web.hku.hk/~bmichael/

University of Oxford ( email )

South Parks Road
Oxford, Oxfordshire OX1 3QY
United Kingdom

HOME PAGE: http://users.ox.ac.uk/~scat1663/

Say Hak Goo

The University of Hong Kong - Faculty of Law ( email )

Pokfulam Road
Hong Kong, Hong Kong
China

HOME PAGE: http://hub.hku.hk/rp/rp01248

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