Corporate Governance in China: Research and Evaluation

CHAPTER 2

Research and Application of the Evaluation System of Corporate Governance

In this chapter we use an evaluation system of corporate governance to appraise the governance status of Chinese listed companies. The results of the research indicate that during the transition period, the corporate governance level of most listed companies is low and the method for improving the governance quality is hard and wide ranging. The level of corporate governance also shows a great difference between industries. If companies are good in corporate governance, they will have higher security in financing, and can strengthen their profitability. Investors will pay a premium for companies that have good corporate governance.

Corporate governance of Chinese listed companies

The sampling of the research and evaluation of corporate governance of Chinese listed companies is sourced from two channels: one is the investigation about corporate governance on Chinese listed companies which was made in 2002 by the corporation of China Securities Regulatory Commission (CSRC), the other is annual reports of listed companies until April 2003. The principle of the sample filter is the information of the index is complete and does not contain abnormal data. Finally, we have 931 available samples.

Governance status of Chinese listed companies

The index of corporate governance has a normal distribution trend, and a big difference exists among individual companies. Observed data suggests that the mean value ...