Research On Corporate Governance Of China’s Listed Banks

Under the existing political and economic system, the mode of corporate governance of listed banks in China is very different from that of the U.K., the United States, Germany and Japan; it is also different from the transitional mode of Eastern Europe and the family mode of Southeast Asia because government involvement is a feature of corporate governance of listed banks in China. There is also a big difference between government involvement in China and in western countries. In general, government involvement includes political relevance and administrative appointment. At present, chairmen, presidents, chairmen of the supervisory boards and independent directors of the listed banks in China are mainly appointed administratively without taking advantage of the market competition mechanism.This study discusses the effectiveness of corporate governance of listed banks from the angle of government involvement. Based on the public data released in "the Report on the Competitiveness of Chinese Banks" and "Analysis of the Annual reports of Listed Banks in China" etc., and analysis of a large amount of governance data, this study adopts such testing methods as multiple regression analysis to test the influence of government involvement on corporate governance, reveal the micro-mechanism of management functions involving board of directors, board of supervisors, management, independent directors, information disclosure, and performance of social responsibilities, find the problems existing in the corporate governance of listed bank under the government involvement, and points out the feasible improvement direction.Innovative points of this study include the following three aspects:Firstly, the study finds that government involvement plays both a positive and negative role in the corporate governance of listed bank in China. On the one hand, the political association helps with the improvement of corporate governance; on the other hand, administrative appointment is not conducive to the improvement of corporate governance. Therefore, how to build a new mode of corporate governance under the premise of government intervention is a tough task faced by listed banks in China.The study finds that political relevance positively promotes governance of listed banks by the board of directors, the board of supervisors, management, independent directors, and it helps information disclosure and performance of social responsibility, while administrative appointment hinders the above-mentioned governance functions.Secondly, the study finds that administrative appointment seriously hinders the improvement and perfection of corporate governance in the listed banks in China. Therefore, appointment of the senior management should mainly be based on the result of recommendation within the bank, making full use of the benefits of stakeholder governance. At the same time, the external markets should be involved as soon as possible to give play to the incentive and restraining effects of the professional manager markets, product markets, capital markets, takeover markets, as well as the independent directors markets on senior management.At present, as far as the corporate governance of listed banks in China is concerned, the chairman, the chairman of the supervisory board, the director of the bank, and the independent directors are mainly appointed administratively without taking advantage of the competition mechanism. As a result, it fails to meet the basic requirements of corporate governance. At the same time, the professional manager markets, product markets, capital markets, takeover markets, the independent directors markets are not playing effective roles. Hence, they fail to motivate and constrain senior managers of the banks effectively. Obviously, governance by external markets is an important direction toward which improvement of corporate governance of listed banks in China should move.Thirdly, governance should aim at the core competitiveness of listed banks. This study finds some unique phenomena in the governance by the board of directors, board of supervisors, management, independent directors and information disclosure and stakeholder governance, which should be the focus of corporate governance improvement. It also finds that the chairman acting as the president is conversely, helpful to the perfection of corporate governance; the size of the board of supervisors is not helpful to the improvement of corporate governance; equity incentive for the director of the bank has significant effects on corporate governance; independent directors are redundant in corporation governance.