Corporate Governance and Market Valuation in China

Posted: 27 Jan 2005

See all articles by Chong-En Bai

Chong-En Bai

The University of Hong Kong - School of Economics and Finance; University of Michigan - William Davidson Institute

Qiao Liu

The University of Hong Kong - School of Economics and Finance; Peking University - Guanghua School of Management

Joe Zhou Lu

The University of Hong Kong - School of Business

Frank M. Song

The University of Hong Kong - School of Economics and Finance

Junxi Zhang

The University of Hong Kong - School of Economics and Finance; National University of Singapore (NUS) - Department of Economics

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Abstract

In this paper, we investigate empirically the relationship between governance mechanisms and the market valuation of publicly listed firms in China. We construct measures of corporate governance and market valuation for all publicly listed firms on the two stock markets in China from the firm's annual reports between 1999 and 2001. Using this three-year panel, we examine the effect of corporate governance variables on market valuation after controlling for factors commonly considered in market-valuation analysis. Our empirical results support several theoretical predictions; for example, we find that both high concentration of non-controlling shareholding and issuing shares to foreign investors have positive effects on market valuation, while a large holding by the largest shareholder, the CEO being the chairman or vice chairman of the board of directors, and the largest shareholder being the government have negative effects.

Keywords: Corporate governance, market for corporate control, ownership, market valuation

JEL Classification: G34, G32

Suggested Citation

Bai, Chong-En and Liu, Qiao and Lu, Joe Zhou and Song, Frank M. and Zhang, Junxi Jack, Corporate Governance and Market Valuation in China. Available at SSRN: https://ssrn.com/abstract=655241

Chong-En Bai (Contact Author)

The University of Hong Kong - School of Economics and Finance ( email )

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University of Michigan - William Davidson Institute ( email )

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Qiao Liu

The University of Hong Kong - School of Economics and Finance ( email )

School of Economics and Finance
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Hong Kong
852-2859-1059 (Phone)
852-2548-1152 (Fax)

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Joe Zhou Lu

The University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China

Frank M. Song

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong

Junxi Jack Zhang

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong
(852) 2859-2192 (Phone)
(852) 2548-1152 (Fax)

National University of Singapore (NUS) - Department of Economics ( email )

10 Kent Ridge Crescent
Singapore 119260
Republic of Singapore

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