Perspective and Empirical Analysis of Hot Issues in Corporate Governance - Collection II of the International Symposium on Corporate Governance of State-Owned Enterprises between China and the EU

Author: Zhang Zongyi
Publisher:
Publish Date: 2006-04-01
Features: Corporate governance, in simple terms, refers to the institutional arrangements and checks and balances concerning the organizational structure, control relationships, and interest distribution of enterprises. It defines not only the relationship between enterprises and their owners but also the relationships between enterprises and all relevant stakeholder groups. China's corporate governance practices have been loud in rhetoric but sparse in results; despite numerous initiatives, the outcomes have been generally modest. Why is this the case? An important reason lies in the insufficient theoretical and practical research on corporate governance reform, with too much emphasis on borrowing the forms of foreign corporate governance without understanding their underlying rationale. As a result, while learning to look increasingly similar in form, everything remains essentially the same, and in some aspects, new and more difficult problems have even emerged. Therefore, it is now time to seriously reflect. Corporate governance is an issue of corporate strategic orientation that is of common concern in many countries. Many developed economies regard the establishment of sound corporate governance structures as a fundamental means of enhancing economic vitality and improving economic efficiency. Due to differences in economic, social, and cultural aspects, as well as varying historical trajectories, corporate governance structures differ significantly across different countries and regions. Broadly speaking, the capital markets in the UK and the US are relatively developed, with the stock market playing a pivotal role in corporate capital structure, adopting a "shareholder supremacy" model of corporate governance. In contrast, in Germany and Japan, corporate capital primarily comes from and is controlled by banks and financial conglomerates, following a "co-governance" model for multiple stakeholders. The fundamental difference between the two models lies in the varying positions of different stakeholder groups in the corporate goal structure. Given China's national conditions, corporate governance cannot fully adopt the UK-US "shareholder supremacy" model or blindly copy the German-Japanese "co-governance" model. Practice has proven that establishing a well-functioning corporate governance system can contribute to improving corporate economic efficiency and social fairness. In this process, of course, we can absorb the strengths of the UK-US and German-Japanese models, but more importantly, we must thoroughly understand the soil environments of various models. Ignoring this point and deliberately imitating or blindly copying a particular model in a country with fundamentally different institutional structures is highly detrimental. Building a corporate governance model suitable for Chinese enterprises must not only face globalization but also address the issue of localization. Only in this way can theoretical innovation make original contributions to the practice of corporate reform in Chinese enterprises. In recent years, a group of young scholars led by Chongqing University has conducted exploratory work in the field of corporate governance, publishing approximately fifty papers in academic journals both domestically and internationally. These papers, based on the research findings of scholars worldwide on corporate governance issues, provide a relatively comprehensive study of the concepts and basic functions of corporate governance, as well as its theoretical foundations and governance mechanisms. At the same time, drawing on the practices of Chinese listed companies, they focus on key issues of corporate governance mechanisms, such as equity structure, boards of directors, earnings management and financing structure, executive incentives, and stakeholders, conducting empirical analyses of pressing issues in Chinese corporate governance. The publication of this book is a compilation of some of these research findings. We hope that these research outcomes can provide valuable theoretical and empirical evidence for the corporate governance reform of Chinese enterprises. At the end, we extend special thanks to the European Commission for its support through the "China-EU Small Project Facilitation Fund," as well as to Mr. Gu Wenzhong, the Chinese project director, Mr. An He, the European project director, and Ms. Sun Ning, the project assistant, for their care and guidance in the publication of this research. Chongqing University, Zhang Zongyi March 2006, Chongqing