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To see the direction of the development of corporate governance in China through two modes of corporate governance

Author: LiShuang From: www.yourpaper.net Posted: 2009-11-27 19:54:09 Read:
[Abstract] the lack of a sound and effective corporate governance of listed companies in China face pressing issues, from abroad two modes to explore that they play a role in the internal and external conditions, combined with China's actual proposed the development direction of Chinese corporate governance.
[Keywords] Corporate Governance the supervision constraints Innovation

Chinese corporate governance model whither the problem has been debated in academic circles, the focus of the debate is nothing more than a market-oriented corporate governance model the development of the Anglo-American countries, Japan, Germany, on behalf of the bank-led model of governance. In this article, we will briefly International on two main model of corporate governance of their respective strengths and weaknesses as well as play a role in the condition to
China's development is to provide a reference.

First, the Anglo-American as a representative of the "market-based" model of corporate governance

Securities market developed in Britain and other countries and regions, the company from the market in the production and management of funds, small banks relative to the market development. Investors put money into the company become the shareholders of the company, the company hold a shareholder meeting to elect the Board of Directors, the Board of Directors appointed managers presided over the day-to-day management of the company's work. In general, the equity structure of listed companies is very decentralized, each shareholder of shares held low, relatively high regulatory costs on managers, and the possibility of free-riding shareholders managers monitor and restrain the desire to reduce this abuse of power by managers is likely to cause damage to the interests of shareholders. More supervision of the company through the external oversight of the market, known as "voting with their feet" mechanism. Shareholders once found that managers may have damage to their own interests in the behavior, you can sell their securities manager performance evaluation of the stock price decline will have a significant impact, thereby affecting the manager's "rice bowl".
This governance mode to play a role in the relatively harsh conditions. First, there must be a well-developed and effective securities market. Information and full disclosure of the financial situation in order to make the stock price is true and accurate and sensitively reflect the value of the company, in order to ensure that the shareholders properly judge the company's development, in turn, said its evaluation of the performance of the company through the sale and purchase of the company's stock. Second, there must be the law of the strong protection of the interests of minority shareholders. U.S. law, shareholders enjoy the right to prosecute managers against their interests, so the very high cost of legal proceedings, the manager not dare to take the risk. On the other hand, the United States is a case made, the law has a strong self-correction and perfection. Even without the edicts of the law, ruling in a case also can be used as the standard of judgment, to ensure the good functioning of the governance model institutionally. Again, to have an active manager market and a sound credit system in the market. The perfect manager market makes employment pressure increases, huge opportunity cost to be prejudicial to the interests of shareholders reduce managers motivation, can effectively protect the interests of the shareholders, to reduce the cost of principal-agent. Managers bad or damage the interests of the shareholders in the operating results of the Company, its reputation will be affected by the credit system developed in the United States, the cost of losing credibility is very high, so that the manager can not continue to engage in the work in this area in the original field.

Second, Japan, Germany, as the representative of the "bank-based" model of corporate governance

Bank-based model of corporate governance, external market development, the company mainly rely on internal governance structure to constrain the behavior of managers. German enterprises in general has a board of directors and board of supervisors of the two bodies. (Mode in Japan and Germany almost here only in Germany as an example) In general, the Board of Supervisors has the right of approval of the Board of Personnel Management and strategic programs, strategic program proposed rights enjoyed by the board of directors by the board of directors is responsible for day-to-day business. This bank-led model to play the role of banks to implement checks and balances on the Board of Directors, to play the triple role of banks in the whole structure, that is an agent of the creditors, shareholders and minority shareholders, mainly with Germany's strong banking system related. In addition, the German civil law is more emphasis on the protection of creditors rather than the interests of minority shareholders, which also contributed to the generation of this model. The benefits of this model enterprises and banks to establish long-term cooperative relationship, reduce the cost of loans, to be able to maintain a stable state, and it does not require the kind of harsh conditions of the market model. Third, the direction of development of the Chinese model of corporate governance

China or bank-dominated financial system, lack of development of securities markets; lack of an active manager market and a sound credit system; legal lack of strong protection of minority shareholders, and the German civil law countries, the statutory law loopholes convenient to provide loopholes for personal gain. All of these issues seem to illustrate the mode of our best development in Germany, China and Germany, however, the biggest difference is that China's banks are state-owned, government banks strong control and influence will result in the failure of the banking supervision. Once the corporate difficulties, the local government may order financial income or GDP, requiring banks to continue to have difficulties enterprises invested, regardless of the potential bad debts. This will produce adverse selection, enterprises under the protection of the government breaks the law, the cause of bad debts by banks concernedly, and finally passed on to the government to use taxpayers' money to plug this loophole. Realize in our bank to complete the arduous task of supervision is very difficult, unless the government's role has shifted to the right bank of the operators to intervene in accordance with the market mechanism, the implementation of the survival of the fittest, so as to ensure that such a system is not distorted.
In contrast, in a market-oriented corporate governance model, the vast majority of enterprise funds raised from the market, the long duration of the use of funds can be good or bad depending on the project independent arrangements, the use of high efficiency and reasonable flow of more enterprises vigor and vitality. In addition, the market model is conducive to the development of venture capital, venture capital to to cultivate innovative enterprises and to encourage scientific and technological innovation is essential. In Japan, Germany, mainly through bank loans, a higher risk of innovative enterprises, has been sound operation principle of the desire of the bank loans are not strong, do not have the funds to support innovation process will naturally backward. Japan and Germany seem to have seen the benefits of this model implies, have introduced the venture capital and other market factors. On the future direction of development, China should introduce market mechanisms, in order to promote innovation and stimulating sustained economic development, and to maintain strong growth momentum.
Institutional change theory is that the actual performance of the specific institutional arrangements remains immune to the impact of the institutional environment in which. Ophelia process of institutional change history evolution, not "rational design. Learn from the developed market economies, the corporate governance system, can shorten the necessary measures of the evolution of the system, but with their own systems, cultural fusion is a relatively long-term process. China has its own special circumstances, so the problem of how to integrate foreign mature governance structure and our own system, the culture will be a long-term exploration. But one thing is clear, the development of China's corporate governance model should be moving in the direction of the market, even if the development of the market lacks many deficiencies that restrict us, because China needs innovation, we need to introduce market mechanisms, China's integration into the international financial markets is an unavoidable fact.


[1] Chen Hsin-yuan, Zhu Hongjun. Corporate governance in transition economies [M]. Tsinghua University Press, 2007.
[2] Cheng Wei Fong Son Wa, Xu slope Ridge.
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