China Securities Corporate Governance Research

After fast development of more than ten years, the security industry in China, starting from scratch, has now grown up to a certain scale. In September 1985, on permission of People's Bank of China, Shenzhen Security Firm was established, which was the first specialized security company in China. Ever since then, the security firms in China have developed rapidly. By the end of 2004, there are 133 security firms in China. But the development of corporate governance in Chinese security firms has lagged behind and there are still many problems.We direct corporate governance research on Chinese security firms, not only because security firms, as modern enterprises, have normal requirements for governance mechanism, but also because security firms have some special characteristics. They possess larger asset volume than majority of industrial and commercial enterprises, which makes the research on corporate governance of security firms much more meaningful than other enterprises.From the general perspective, although Chinese security firms have usually established board of directors, board of supervisors as well as managers, the functions and relationships have substantial differentiation and randomness. The work division among three boards is unclear and they can not operate effectively. Due to above governance drawback, the running of security firms was extremely abnormal. During the difficult time of bear market, Chinese security firms ware highly unsteady and risky. There are already 17 security firms closed or trusted in recent years. In analyzing the risk accruement of these security firms, we find that corporate governance drawback usually becomes a basic root, mainly including biggest shareholder manipulation and internal control.Specifically speaking, researching and designing the mode of corporate governance in Chinese security firms should take the following factors into consideration:The first factor is basic principles of corporate governance and the specialties of security firms. The second factor is available practical modes of different corporate governance in security firms, which providesus with international experiences and lessons. The last but not the least is the characteristics of risks of financial institutions.According to our research purpose, this paper is structured as follows:First, the implication of corporate governance is defined. Beginning from the theoretical analysis of corporate governance, according to the aim of corporate governance made by OECD, we compare the international modes of corporate governance.Second, through the research on the market withdrawal mechanism of security firms, we analyze the drawbacks of corporate governance in security firms. Six suggestions on how to improve corporate governance were put forward and relevant institutional advices were given on this basis.Third, innovative research is made on corporate governance rating of Chinese security firms. By means of studying corporate governance rating systems in overseas companies and associating with current corporate governance situation in Chinese security firms, we try to establish corporate governance rating systems in Chinese security firms.Finally, on the basis of theoretical analysis of corporate governance and study of corporate governance modes in overseas security firms, this paper puts forward ten suggestions with certain practical significance.