Corporate governance and market valuation in China.pdfVIP

Journal of Comparative Economics 32 (2004) 599–616 /locate/jce Corporate governance and market valuation in China a,b,∗ a a a Chong-En Bai , Qiao Liu , Joe Lu , Frank M. Song , Junxi Zhang a a Faculty of Business and Economics, The University of Hong Kong, Hong Kong, China b Tsinghua University, Beijing 100084, PR China Received 15 April 2003 Bai, Chong-En, Liu, Qiao, Lu, Joe, Song, Frank M., and Zhang, Junxi—Corporate governance and market valuation in China In this paper, we investigate empirically the relationship between governance mechanisms and the market valuation of publicly listed firms in China. We construct measures of corporate governance and market valuation for all publicly listed firms on the two stock markets in China from the fir- m’s annual reports between 1999 and 2001. Using this three-year panel, we examine the effect of corporate governance variables on market valuation after controlling for factors commonly consid- ered in market-valuation analysis. Our empirical results support several theoretical predictions; for example, we find that both high concentration of non-controlling shareholding and issuing shares to foreign investors have positive effects on market valuation, while a large holding by the largest shareholder, the CEO being the chairman or vice chairman of the board of directors, and the largest shareholder being the government have negative effects. Journal of Comparative Economics 32 (4) (2004) 599–616. Faculty of Business and Economics, The University of Hong Kong, Hong Kong, China; Tsinghua University, Beijing 100084, PR Ch