Corporate governance in China has evolved greatly during the transition process, whilst it has developed the economy with a high and steady rate of growth. Even though many corporate governance mechanisms have been implemented and developed as part of the Chinese corporate governance system, the road ahead is still long and further improvements are required. The study of effects of ownership concentration and structure on the performance of Chinese listed companies provided mixed results, and was therefore inconclusive. In terms of the accounting measure of performance (ROE), the study found no significant relation; however in terms of the market measure (Tobin’s Q) the study found that both ownership concentration and structure did help explain the performance of Chinese listed companies. These results point to a difference between the actual influence, and perceived influence.
A collective effort and balance of various mechanisms are necessary from both the State and the evolving private sector to foster a system conductive to a high standard of corporate governance.
The continued restructuring of China’s large sector of SOE’s and the separation of government and enterprise management is fundamental to economic reform and must continue through the conversion of large blocks of non-tradable State shares to tradable shares. The rights of minority shareholders however must continue to be strengthened and protected. Reformed SOE’s are likely to have increased accountability and reduced political influence, as well as providing increased liquidity in the stock markets. Removing the large blocks of non-tradable shares and increasing liquidity in the stock markets will allow the market for corporate control to play a greater role as a governance mechanism in the future. The role of information disclosure and transparency as a governance tool is also likely to be strengthened, both through new regulations and the accounting practices imported by foreign firms operating in China. However, greater investment is needed in education and training for the Chinese accounting industry in the longer term. Overall, China has made significant progress in its pursuit of a functioning corporate governance system. However, considering the traditionally important social role SOE’s play in China, and the CCP’s ideological opposition to private property rights, the State may not be willing to relinquish control easily. It is therefore important to note that conflicting interests are likely to persist in Chinese listed companies so long as the State maintains any degree of ownership and control rights.
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