Study On The Peformance Problem Of China's Listed Companies In The Transition Period

The establishment of the Shanghai Securities Exchange is considered as the beginning of the securities market in China. In recent fifteen years,the stock market,as the most important part,of the securities market has achieved great success.The number of the listed companies reached 1377 by Dec. 31, 2004,and the market value amount to over a quarter of the GDP.While the market expands in the aspect of quantity,the performance of the listed companies is not enhanced.The problem sets barriers to the development of securities market in China.The foundermental reason lies in that the game competition hasn't reached the ideal equibrillium in the transition from the planned economy to the market economy.Due to those features in the transitional economy,the difference between the governance mechanism of Chinese listed companies and that of the developed market economy exists.Under such a circumstance, the studies as follows are especially important.How on earth is the current performance of our listed companies?Does this situation result from the institution, or the management or the cycle of macroeconomy?How can we improve the performance of those poor performed corporations?Therefore,it is vital to understand and evaluate the performance of the listed companies,and find relevant measures by case study.In fact,it is puzzling that the outcome of the EVA shows that the overall performance of the listed companies wastes a large amount of fortune.Obviously,it is difficult to find the reason for the poor performance of our listed companies the perspective of the developed market.However,the reason is apparent if we view thisproblem in the background of our economic transition.Since China is in the transitioned the listed companies in China don't meet the common requirement for a listed corporation.Their previous entities—the state-owned enterprises are lack of viability,or the requirement for the companies in the transitional economy differs from that of the normal ones.Moreover,the incompletion of the governance structure and the obstacles in the governance mechanism lead to the ineffective principal-agent incentives and hence it is hard to secure the agents' behavior complying with the enhancement of the performance of the listed companies.Besides, the macroeconomic cycle is also an important factor explaining the overall performance of the listed companies.which is relevant to our transitional background.To sum up, to find out the reasons for the poor performance of the listed companies and the way to improve their performance,we should put our study in the background of economic transition.This disseration combines intimately the theoretical and empirical analysis,and applies the Maxist's dialectics and systematics,institutional,historical,comparative and game analytical methods into the study.The dissertaion,based on the collection and knowledge of a large sum of literatures,attempts to innovate in the aspects of research perspective,the application of materials and the analystic methods,and achieves some research fruits as follows:Firstly,the dissertation introduces a comprehensive analytical framework to explain the performance of China's listed companies,and conducts empirical studies. The framework embodies innovations.At present,the researches on corporate performance all puts much emphasis on the application of analytical instruments and unduce emphasis on the analysis from some particular aspects,while lacking systematic way of thinking,which is easy to lead to one-sided results and misunderstanding of the performance factors that influence corporate.This dissertation tries to make some changes.Based on all the present researches,this dissertation stresses a comprehensive research method.Based on extensive data and the evaluation on the performance of China's listed companies,this dissertation draws the following conclusions a whole,the performance of China's listed companies is not so satisfactory.Then the paper puts the analysis under thebackground of the economic transitioned suggests a frame that the economic transition affects the corportate governance,and the corporate governance affects the corporate performance. Generally speaking,the perfect coporate governance structure and the effective mechanism of corporate governance are necessary to the efficient performance of the listed corporations.The corporate performance embodies the overall governance level, and the lack of good mechanism would definitely cause the poor corportate performance.Based on this understanding,the paper conducts some research on the core mechanism,shareholder managing mechanism,the corporate governance structure,the creditor governance mechanism,the market of right of control governance mechanism,and does a detailed analysis on the current situation of those core mechanism,defficiency as well as their effect on the corporate performance.Based on these analysis,the countermeasures are brought forward.Secondly,the dissertation put forward that the Division of equity share (DES) is the main factor which affects the performance of the listed companies.Today, DSE is a hot issue in the academic field,but the discussion focused on the DSE's effect on the development of the capital market instead of the effect on the performance.DES is a fundamental charcteristic of listed companies in China.However the separation of tradable and nontrdable shares has taken away the balance in shareholders right and obligation.DSE is the main institutional deficiency in the transition period.DSE distorted the incentive mechanism and hence caused the irrationality behavior.DSE distorted the financial mechanism and hence caused the speculative M&A.The distortion has led to the poor performance of the listed companies.As for DSE,we should recognize its historical existence.With the development of socialism market economy,DSE gradually becomes the outstanding conflict of listed companies institution.Empirical study illustrated a non-lincear horizontal relationship between the structure of share tradability and performance of listed companies,that is,a bi -turn-turn-around pointThe result fully bears out that DSE is the main factor which affects the performance of the listed companies.The policy implication is that the reduction of the state-owned-shares should accompany with the circulation of all the shares.Only doing so can we improve the internal and external governance mechanism and change the embarrassment of the poor performance.Thirdly,the principle-agent relationship in listed companies is divided into two levels,one between the board of shareholders and the board of directors,and the other between managers and board of directors.The board of supervisors is the important constraint mechanism in governance structure and the significant function of independent directors is also supervision. So,the internal governance is the important aspect of governance mechanism.Through a systematic incentive and constraint mechanism, the internal governance in listed companies resolves the problem of the benefit disagreement between agent and principale which is caused by information asymmetry and opportunism conduct of agent.The thesis in detail analyzes how the internal governance mechanism in Chinese listed companies especially those which transformed from traditional state-owned enterprises acted, and points out that influcenced by the unexhaustive institutional reform and interest groups, the principale -agent relationship not only needs to solve common principale-agent problems, but also needs to deal with the problems of institutional transition。Fourthly,our study shows that the asset-liability ratio in Chinese listed companies moves oppositely with their performance, and that the optimal capital structure is far below the international level.According to international experience, the high liability ratio does not necessarily bring about poor performance, and the key issue is whether the governance of liability is effective.The effective governance of liability can force managers to make an effort in improving operating conditions and performance.Foreign experience research tells us that financial leverage is positively relative to enterprise value.According to emperical research, the companies with good performance among Chinese listed firms had low asset-liability ratio.By contrast, the companies with high liability ratio had poor performance.The optimal capital structure is far below the international level.This result does not coincide with international evidence.An possible explanation is that the liability restriction function in Chinese firms is weak, and the liability restriction does not exert much pressure upon managers.The major creditors of firms are state-owned banks.However, the assets of both firms and banks are possesed by the same owner , namely the state.Moreover, banks can not become shareholders of listed companies.At the same time , the bankruptcy law provides that creditors can nottake over bankrupted enterprises.Thus,bankruptcy and liquidity do not impose restriction on managers.Fifthly,the effect of the control right is not fully exerted.The corporate governance which stems from the principal-agent cost problem,in a broad sense,includes the internal and external governance mechanism.Normally,because of the inherent deficiency of the internal governance mechanism.It is now facing the danger of failure.So it is necessary to introduce "the force of invisible hands " ,i.e. the external governance mechanism. The nonliquid of the state-owned-shares and the legal person share severky obstacle the shape of the corporate control right market.By analyzing the empirical data, we find that the market of the control right creates value.However, due to the DES defect,the effect of the control right is not fully exerted.This paper focuses on the function, precondition and effect of the market for corporate control in order to guide the reform of China's listed companies.But at the present there exists many systematic arrangements which hinder the transaction of corporate control rights and the implementation of the effective corporate contingent governance.Therefore,it needs systematically being removed and perfected.Sixthly, fluctuation in macroeconomy and the system of securities market have imporant effect on the performance of listed company.Firstly,in western countries,securities market is comparatively effective.By way of ups and downs,economy cycle has impact on market value of listed market.However,in China,stock price couldn't reflect the performance of listed company.The efficiency of the market is weak.Fluctuation in Macroeconomy mainly affect the performance of listed companies by way of influencing the supply and demand as well as market price.Fluctuation is fragilely related to market value.Since 1979,China has experiened five large economic fluctuation.According to the analysis of GDP growth and ROE of listed companies,the coeffient is 0.921,namely strongly related.The research on institutional economy reveals that institutional environment shapes the economic performance.The mechanism defect of the IPO market weakens the choice of the market about the entreprises.Recently,we are lad to see stready administrate agecy reform glad perfection of ecomony and legal system,under the guide line of sciectific development and constructing harmony society theory China securitiesmarket has made some paym in especially the publication of China securities is facing unexpericed opportunities on the basis of conterpart's experience China's listed is bound to be fruitful in performance in the furture.Seventhly, the dissertation emphasizes on the effect mechanism between the corporate governance and performance. However, the former researchers put emphasis on the relevant relationships between the governance and performace instead of the effect mechanism. The paper fuses the practice of the listed companies, reflects the loss and gains in the institutional innovation of the listed companies, absorbs the international experience and finally provides the strategic conception and suggestions to improve the corporate performance and enhance the competence.In recent years we have found with delight that Chinese constitutionalism and governmental reform are going on healthly,and the economic and legal system and the market economy system are getting improved.Chinese stock exchanges have made great achievements in legal system construction,protection of minority shareholders, optimization of corporate governance structure,market-orientted reform and opening up,we are coming through a great era of drastic changes. We are confident that China's listed company are sure to achievce more brilliant petrformance and acreate more returns to the society if they can learn and transplant the successful experience from the mature market and further the institutional construction.