Corporate governance in China: Regulatory reforms and policies

Du, Anna; Boateng, Ageynim

Abstract

Corporate governance, which is defined as the structure of rights and responsibilities among the various parties who have a stake in a business organisation (Aguilera and Jackson, 2003), has attracted immense interest from academics, practitioners and regulatory authorities of both developed and developing countries in recent years (Cheung et al., 2008; Kim and Lu, 2013). The interest stems from a number of reasons including the recent corporate scandals in Europe and the United States; the financial crisis and the increasing integration of the world economy. In the context of China, the main driving force behind the corporate governance reforms is perhaps the market reforms that have transformed China’s centrally planned economy into a market-oriented economy (Li, 2013; Chen, 2015). As part of the enterprise reforms, China has privatised or transferred part of the ownership of firms from the state to the public and private owners, such as individuals, management, institutions, employees and foreign investors. This process diversifies the ownership structure and attracts international investments, which makes corporate governance a significant issue (Rajagopalan and Zhang, 2008; Huang and Zhu, 2015). Research evidence suggests that there is a link between and causality among law, finance and economic growth at the country, industry, and firm levels (see, Demirguc-Kunt and Maksimivic, 1998; Levine, 1999; Beck and Levine, 2002). A number of scholars including Claessens (2003); Cheung et al. (2008); Clarke and Du (1998); Habib and Jiang (2015); and Lee (2015) have rendered support regarding the positive relationship between corporate governance and growth. For example, better corporate governance leads to increased access to external financing, lower cost of capital, increased foreign direct investments, better performance and growth (La Porta et al., 1999; Claessens, 2003). Consequently conventional wisdom suggests that corporate governance systems in emerging countries should focus on providing an effective legal system and strong institutions to increase growth.

Citation

Du, A., & Boateng, A. (2016). Corporate governance in China: Regulatory reforms and policies. In F. Ngwu, O. Osuji, & F. Stephen (Eds.), Corporate Governance in Developing and Emerging Markets. London: Routledge. https://doi.org/10.4324/9781315666020

• Online Publication Date: Dec 23, 2016
• Publication Date: 2016
• Deposit Date: Dec 14, 2021
• Publisher: Routledge
• Book Title: Corporate Governance in Developing and Emerging Markets
• Chapter Number: 8
• DOI: https://doi.org/10.4324/9781315666020
• Public URL: http://researchrepository.napier.ac.uk/Output/2829112