TWO ESSAYS ON CORPORATE GOVERNANCE IN CHINESE LISTED FIRMS
SHAOHUA YAO Ph.D. THESIS
THE UNIVERSITY OF HONG KONG 2010
Abstract of thesis entitled Two Essays on Corporate Governance in Chinese Listed Firms
Essay I: Share Merger Reform, Corporate Governance and Firm Value in China Essay II: Board Independence, Related Party Transactions and Firm Performance in China
Submitted by Shaohua Yao (姚少華)
For the Degree of Doctor of Philosophy at the University of Hong Kong in July 2010
The emerging market crisis in 1997 and 1998 has generated extensive research in corporate governance. This thesis is dedicated to the study of corporate governance in Chinese listed firms.
In the first essay, I examine the relationship between corporate governance and compensation scheme in the share merger reform in China and the effect of the share merger reform on firm performance. Consistent with the agency theory, I find that the compensation ratio is significantly and negatively correlated with corporate governance, indicating that the well-governed firms have less severe problem of expropriation by their non-tradable (controlling) shareholders and lower discount on the value of non-tradable shares, and that their tradable shareholders are willing to accept lower compensation ratio. I further examine the influence of institutional investors in the process of share merger reform and find that the compensation ratio is significantly and negatively correlated with the concentration of shareholding in the hands of institutional investors. This indicates possible collusion between
i
institutional investors and non-tradable shareholders in the negotiation of compensation scheme. This negative effect of collusion on compensation scheme cannot be mitigated by corporate governance. I find that there are significant improvement in both corporate governance and firm performance after the share merger reform. The share merger reform causes some structural change on the... [continues]
SHAOHUA YAO Ph.D. THESIS
THE UNIVERSITY OF HONG KONG 2010
Abstract of thesis entitled Two Essays on Corporate Governance in Chinese Listed Firms
Essay I: Share Merger Reform, Corporate Governance and Firm Value in China Essay II: Board Independence, Related Party Transactions and Firm Performance in China
Submitted by Shaohua Yao (姚少華)
For the Degree of Doctor of Philosophy at the University of Hong Kong in July 2010
The emerging market crisis in 1997 and 1998 has generated extensive research in corporate governance. This thesis is dedicated to the study of corporate governance in Chinese listed firms.
In the first essay, I examine the relationship between corporate governance and compensation scheme in the share merger reform in China and the effect of the share merger reform on firm performance. Consistent with the agency theory, I find that the compensation ratio is significantly and negatively correlated with corporate governance, indicating that the well-governed firms have less severe problem of expropriation by their non-tradable (controlling) shareholders and lower discount on the value of non-tradable shares, and that their tradable shareholders are willing to accept lower compensation ratio. I further examine the influence of institutional investors in the process of share merger reform and find that the compensation ratio is significantly and negatively correlated with the concentration of shareholding in the hands of institutional investors. This indicates possible collusion between
i
institutional investors and non-tradable shareholders in the negotiation of compensation scheme. This negative effect of collusion on compensation scheme cannot be mitigated by corporate governance. I find that there are significant improvement in both corporate governance and firm performance after the share merger reform. The share merger reform causes some structural change on the... [continues]
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