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Institutional context analysis of the study of corporate governance in China

Author: ZhangGongFu From: www.yourpaper.net Posted: 2009-04-02 03:52:21 Read:
[Abstract] institutional context analysis is an essential part of the empirical study, this paper summarizes the main features of the governance structure of listed companies in China by reviewing the evolution of the corporate governance structure for corporate governance research scholars reference.
[Key words] corporate governance; institutional context; government intervention; internal control

After thousands of years of feudal peasant economy, rapid plunge into the highly centralized planned economy, and then take the Eastern European countries in transition measures to quickly return to the market economy. Due to this particularity of the Chinese system, the for many western long-term development of the theory and empirical results may not apply in China. Even if it might be applicable to, they have to be done by the special circumstances of drastic changes. Therefore, the study of China's problems must proceed from the system analyzes the (Cai Xiang et al, 2003). Corporate governance is one of the most popular topics in recent years, empirical research field, in the empirical study of a number of corporate governance, there are many simple to apply foreign econometric model, the use of econometric job made to the data of China's listed companies.
The governance structure of listed companies in China, along with the deepening of reform of state-owned enterprises and the development of the securities market and continue to develop and evolve, advanced elements in the absorption of the developed countries in the world of corporate governance, with obvious signs of state-owned economic restructuring. Therefore, the study and research of the governance structure of listed companies in China should reform process of China's corporate governance structure, the company's growth combine a unique system in which the background.

First, China's corporate governance structure reform process

In the planned economy period before the reform and opening up, the governance structure of the state-owned enterprises is a government deprived of state-owned enterprises to maximize operational autonomy by the Government to fully grasp the residual claim and control of highly centralized corporate governance structure. Human, financial, material in this governance structure, production and operation required all countries to plan supply solution, for, production, and marketing activities completely unified arrangement by the State plan, business executives appointed by the state no operational autonomy, state-owned enterprises has become an appendage of the executive authorities. This corporate governance structure caused by the industrial economic incentives and low productivity, there is no effective incentive mechanism to mobilize the enthusiasm of workers at the enterprise level. Precisely because of this, directly led to the lack of operational autonomy for state-owned enterprises reform began in the late 1970s (Lin et al, 1997). Since the reform and opening up, China's state-owned enterprises have experienced different stages of devolution of power, contractual management and corporate system. Despite the different stages have different content, but the fundamental point of view, the reform of state-owned enterprises in China is the main line along the corporate governance structure to promote the performance for the government, to the operators of the state-owned enterprises, decentralization none other. In other words, the process of reform of state-owned enterprises in China, which is the process of evolution of its governance structure.

(A) the devolution of power stage (1978-1987) the governance structure of state-owned enterprises
The beginning of the reform and opening up, the state-owned enterprises of the main problems is the lack of operational autonomy, workers' lack of production and inefficient enterprises. In response to this situation, the state has taken reform "rights conversion efficiency" as the main content, which is giving part of the new enterprises gain control over, incentives for business operators and producers to generate more income and strive to improve incentives to work and efficiency of resource allocation, so as to achieve increased revenue, residual profit and enhance the purpose of the wages of workers. This stage the central authorities have adopted decentralization measures: First, July 13, 1979, the State Council issued five documents aimed at promoting state-owned enterprises reform of devolution of power; 1984, the State Council issued "on the further expansion of state-owned industrial Interim Provisions of the autonomy of enterprises to expand the autonomy of enterprises in production planning, product sales, material supply and profit retention 10; 1985 the State Council issued the "Interim Provisions on Several Issues on enhancing the vitality of the state-owned large and medium-sized enterprises , "clearly a variety of operating rights. None other measures taken by the central profit retention system including 1980, 1983 and 1985 two-step import substitution policy.
State-owned enterprises to expand their power and benefits, no autonomy under the planned economic system to a certain extent to solve the micro-management and lack of efficiency and vitality (Lin et al, 1997). But decentralization none other measures, did not make an independent property rights from administrative to expand their power, does not bear the responsibility of the State-owned Assets Management, but none other by expanding the right to have control over part of the corporate profits, the original enterprise The relationship between ownership and has not been touched. In addition, the reforms enterprises to expand their operational autonomy, there is a degree of vitality, but also brought the ownership of the lack of constraint for the right to operate, resulting in and strengthen the "internal control" phenomenon. Short, decentralization enterprise, between owners and business owners do not form a valid Principal - agent, the agency problem is still very prominent (Duan Qiang, 2002).

(B) The contract responsibility system phase of the governance structure of state-owned enterprises (1987-1992)
In order to unify the devolution of power and state-owned assets, stable revenue, in order to solve the nation owners and business operators to share the residual claim the benefits of friction started the trial of the contract responsibility system, beginning in 1987, the reform of state-owned enterprises to give business more fully or even completely residual claim and residual control rights (Weiying, 1999). Contracting system this governance structure of the natural defects: First, the principal - agent contract between the Government and the contractor is administrative in nature, the contract system the agent of choice is not market-oriented, but is determined by the competent authorities, Therefore, the contract system is difficult to get rid of government intervention in the sector to enable enterprises to operate independently, the separation between government and enterprises; Second, the short-term of the contract and with the annual profit-linked characteristics are likely to cause the contractor only the pursuit of the contract period income , regardless of the long-term development of short-term behavior, can not play the role of long-term incentives and constraints; business, the biggest drawback of the contract system is to distort the legal property system, separation of ownership and management under the contract system, will not enable enterprises to establish an independent legal system of property rights, does not make a real civil rights body. Accordingly, there can be no generation of the corporate governance structure and operation (Strong, 2002). In addition to the implementation of the contract system, the state continued during this period of corporate decentralization, established in 1992 the state-owned industrial enterprises to change their operational mechanism Ordinance concrete implementation of state-owned enterprises in the production and management, product pricing, sales, purchasing, personnel , 14 investment and other aspects of autonomy.

(C) the corporate restructuring stage (after 1992), the state-owned corporate governance structure
Devolution of power, the contract for the operation and reform measures is limited to the adjustment of the right to operate, does not touch on the reform of property rights system, and thus unable to really solve the problem of not working mechanism of state-owned enterprises and capital. Therefore, the establishment of the structural reform of property rights as the core content of the joint-stock reform and modern enterprise system was put on the agenda. China's urban pilot joint-stock of state-owned enterprises is gradually carried out from 1984. December 1986, the State Council promulgated the "deepening of enterprise reform and enhance the vitality of enterprises decided to implement various forms of contract system in some state-owned enterprises, joint-stock pilot, which marked China's state-owned enterprises into stock companies step test kicked off. In order to guide and regulate the promotion of joint-stock pilot work, the State Council promulgated the "joint-stock enterprises pilot approach" and a series of supporting documents. These policies greatly promote the joint-stock pilot to carry out a comprehensive joint-stock enterprises reached 11,000 by the end of 1993. in November 1993, the Third Plenary Session of the 14th Central Committee of the CPC proposed the establishment of modern enterprise system, began a pilot and explore the establishment of a modern enterprise system. In July 1994, China's first "Company Law" enacted by the governance structure of the limited liability company, wholly state-owned companies and joint stock three corporate enterprises, the reform of state-owned enterprises standardized governance structure. End of 1998, the transformation of the state-owned enterprise into a joint stock limited company have been tens of thousands.
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