Study On The Corporate Governance Models: A Perspective Of Financial Structure

Most research on corporate governance models mainly focus on exploring the influences of the market system, legal framework, social and culture factors which affect companies in choosing appropriate governance model in different countries from a macroscopic perspective. Being considered as a major governing body, the shareholders' role and how it affects corporate efficiency are also falling into the scope. But few studies probe the relationship between the corporate governance models and financial structure in a microscopic view. This paper tries to demonstrate that the enterprises' financial structure is the dominate factor influencing the selection of corporate governance models and its operating efficiency. Only when the governance model of a company fits with its financial structure enable it to improve efficiency on a solid base. Thus, from a financial structure perspective, it examines the issues for China's state-owned enterprises (state-controlled enterprises) in choosing appropriate governance model. It also puts forward the essentiality and feasibility of increasing the creditor's governance based on the theory of proper involvement of stakeholders in corporate governance.The general characteristic of shareholder-governance model in most of China's state-owned enterprises can be described as co-governance of controlling shareholders and insiders. So the inefficiency of cooperate governance is regarded as a result of the absolute controlling power of the state-owned shareholders. Therefore many researchers believe that reducing the proportion of state-owned shares and increasing the number of shareholders are realistic choice of ownership diversification. However, empirical studies reveal few positive results during the process of ownership diversification in China's state-owned enterprises. Most of the enterprises did not show any operational improvements resulted from the changing of financial structure other than just expanding a new channel to financing the company. For China's state-ownedenterprises, under the defective conditions of corporate governance, the low efficiency is the result of the inaptness of shareholder's governance models and its financial structure. So there are many corporate governance problems exists, such as the restricted effect of the complementally functions of different corporate governance mechanisms, the selection and supervision process of the managers, the harmonization of different interests of investors, etc.. This paper tries to introduce the new idea of emphasizing the utilization of the creditor's governance based on the distinctive features of the capital structure of the state-owned enterprises, which might be helpful in solving the stacked corporate share structure reform in the market. That is, by improving the operation conditions of different governance mechanism that rooted from the in-depth analysis and recognition of the state-owned enterprises' financial structute, the ultimate goal of state-owned enterprises refonn could be achieved at the lowest costThe dissertation is divided into 7 chapters. Chapter One is the Introductions. It begins with the introduction of the background of this paper, the value of the subject, research approaches, structure and innovational ideas. Chapter Seven is the Conclusion and Research Prospect part. It concludes with the suggestion that "shareholder and creditor co-governance" model is an ideal choice for state-owned enterprises reform in China, and special consideration is put on how to maximize the function of creditor's governance mechanism. It also points out the imperfections in anglicizing corporate governance from a financial structure angle and suggests potential research directions in the future. The other five chapters can be divided into three parts, theoretical analysis, empirical analysis, and strategy research.Theoretical part includes Chapter Two and Chapter Three. Chapter Two is Summary of Basic Theory and Relevant Research. It introduces basic theories and main standpoints in corporate governance models and financial structure research fields. It points out the theoretical foundation of choosing the financial structure as the research perspective and summaries the conclusions and limitations of this approach. Chapter Three is Analyzing Frame of Corporate Governance Models, A Perspective of Financial Structure. It points out that corporate governance model is the aggregation of different financial structure oriented governance mechanisms. The enterprises' financial structure determines the pattern of the corporate governance in three aspects: the main governance problem, the main governance mechanism, and the main governance subject. It proposes three kinds of corporate governance models, andanalysis the impact of the three levels of financial structure that may influence the causes and processes of governance model. It also explores how financial structure affects corporate operating efficiency!Empirical part includes Chapter Four and Chapter Five. Chapter Four is Comparison of Corporate Governance Models, A Perspective of Financial Structure. Based upon the comparison of corporate governance models from different financial structure, it conducts a systematic analysis on the application and efficiency of "shareholder-governance" model and "shareholder and creditor co-governance" model. The conclusion further illustrates that choosing proper corporate governance model that fit with its financial structure is the key point to improve corporate performance. Chapter Five is the Impact of Financial Structure in China's State-Owned Enterprises' Governance Models. It depicts the current situations of the financial structure and the main kinds of governance models in China's state-owned enterprises. It also conducts empirical study on capital structure and corporate governance model of listed state-owned companies. The result shows that the essential reason for "shareholder-governance" model fails to function well in the market is because it does not cope with the high debt-asset ratio of the company. It indicates that under current equity and liability structures, the market does not have necessary institution system that can support "shareholder-governance" model and "creditor-governance" mechanisms. The result is serious governance problems in the market, such as insider control and the common phenomenon in which controlling shareholders snatch the benefit of the other investors.Strategy design is Chapter Six, Selection and Realization of Target Governing Model for China's State-Owned Enterprises. It elaborates the value of building the target governing model, its principle, and basic frame. It suggests "shareholder and creditor co-governance" model as the main framework and proposes three options. It also gives some pragmatic suggestions on how to build "shareholder and creditor co-governance" model, which are exploiting the advantages of both "shareholder governance" and "creditor governance" mechanisms, reconstructing the corporate governance subjects, and improving the general background of corporate governance.Innovational ideas of this paper are as follows:1. Corporate governance model is the aggregation of different financial structure oriented governance mechanisms. Characterized by the difference of the main governance mechanism and governance subject based on different financial structure, there are three kinds of corporategovernance models: "shareholder-governance" model, "shareholder and creditor co-governance" model and "stakeholders co-governance" model.2. With a perspective of financial structure, it studies the decisive influence for financial structure in choosing corporate governance model and points out the advantages and limitations of different models. The proposed studying begins from financial structure, governance mechanism, governance model and governing efficiency provides a new research framework for constructing the corporate governance models for China's state-owned enterprises.3. Besides the positive effects of equity structure, capital structure and liability structure also have impact in choosing of the corporate governance mechanism. It includes shareholder's governance, creditor's governance and fundamental governance mechanisms. To some extent, the role of capital structure is more important and more directly in choosing proper governance model.4. Efficiency is the key point in studying the model of corporate governance. By indicating that corporate governance problem is different in the enterprises, choosing proper model is very important Taking advantage of different governance mechanisms can maximize the performance efficiency while minimize the negative effect5. The presupposition of confirming a governance subject is the key factor in building an efficient governance model in state-owned enterprises. It is vital to emphasis the controlling role of the state-owned shareholders and the state-owned commercial banks and utilizing the advantages of its role as an active shareholder and active creditor.6. The solution of insider control problem does not only rely on shareholder's governance mechanisms, but also depends on utilizing the complement function of creditor's governance mechanisms. Suggestions to improve corporate governance efficiency includes rebuilding financial credit mechanisms and a new relationship between the banks and enterprises, enforcing governing power of commercial banks, and developing the enterprise bond market. By increasing the banks' governance power, developing the bond market so that the creditor's can play more important role in corporate governance, the abuse of the controlling shareholders could be neutralized in some way.