Corporate Governance And Competitiveness In Chinese Listed Companies

China's stock market has made remarkable achievements since last century Chinese government opened it. But, Chinese listed companies still have deep problems and structural contradictions in a transitional economy. With the ending of WTO transitional period, Chinese listed companies will face great market competence. It is important to research about how to improve listed company's competitiveness and extend their market.And as a part of modern enterprise system, corporate governance plays an important role in coordinating the interests of parties from internal and external. It will help improving the absorption of high-quality economic resources, and guiding them to the optimal configuration. So there is no doubt that corporate governance can not only help to improve the profitability in the short term, but also enhance the competitiveness in the long term. However, we found little about this by literature review. This paper attempts to make efforts in this regard to fill the gap.On the base of former thesis on corporate governance and competitiveness, this paper follows the route of economics methodology, using econometric analysis chiefly, and combined with empirical and normative analysis, qualitative and quantitative analysis, theory and practice analysis, comprehensive and logical analysis. The research sample is 1015 listed companies in Shanghai and Shenzhen, using their data during 2004-2006. Full text is divided into eight chapters:Chapters 1 is the Introduction, which introduces the background and significance of the topic, then makes a general literature review, and sets up research objectives, content and technical route.Chapter 2 is the theoretical analysis of corporate governance and competitiveness, which first introduces the basic notion, then illustrate their relationship from shareholder structure, Board characteristics, and incentive to executives, building a basis for further research.Chapter 3 introduces some of the major competitiveness evaluation methods and put forward a reasonable competitiveness evaluation system. The system selects nine indicators to evaluate enterprises competitiveness from three aspects:size, growth, and efficiency. In this paper, all the nine indicators are available from annual reports of listed companies. By doing so, the paper is trying to make more people be able to use this system.The paper evaluates above 1015 Chinese listed companies during 2004-2006 in chapter 4, using our system. To do this, the paper uses standard deviation method to standardize each indicator according to the company's sub-industry, thus the resulting indicators have industry information, which reflect relative competitive advantage in one's industry, so the paper can use these standard values for direct comparison. As a whole, during 2004-2006, major evaluation indicators are rising, the listed companies'competitiveness is gradually increasing. In details, seen from three-year average score, the highest competitiveness industries are real estate, information technology, petrochemical and plastics manufacturing, and the lowest is the wholesale and retail trade industry; Seen from regional perspective, the strongest provinces are Shandong, Beijing, Yunnan and Jiangsu, and the weakest are Tibet, Ningxia, Qinghai, and Shaanxi.From Chapter 5 to Chapter 7, the paper uses econometric analysis, and they are core chapters in this article.In chapter 5, the paper mainly discusses the relationship between shareholder structure and competitiveness from three aspects as follows:equity concentration, the nature of equity, and equity liquidity. The empirical results show that firstly, on equity concentration, at this stage of China, a modest equity concentration is necessary, the blind pursuit of equity decentralization is not suitable for Chinese national conditions. Secondly, on the nature of equity, the state-controlled ownership has a obvious non-linear effects on competitiveness, which indicates that it is too early to reduce the proportion of state-owned shares. Thirdly, on liquidity, there is no obvious relationship between the proportion of tradable shares and competitiveness, which may be the result of lowest tradable shares and the constitution of shareholders, as well as the purposes shareholders holding them. In China, low tradable shares have led to functional abnormalities, focusing on the phenomenon that the share price does not fully reflect the competitiveness of listed companies. In the long term, we should gradually improve the ratio of tradable shares, reduce the proportion of non-tradable shares step by step, and ultimately makes all of them tradable.In chapter 6, the paper mainly discusses the relationship between Board characteristics and competitiveness from four aspects as follows:the combination or separation of chairman and CEO, the independent director system, the size of Board, and the frequency of Board meeting. Empirical results show that firstly, compared to combination, separation of chairman and CEO is better for our country, we should keep on promoting it. Secondly, Though has good intentions, independent director system does not have immediate efficiency, which maybe the result of our imperfect system. In the future, it is good to gradually improve China's independent director system by ensuring their independence, their ability, and their corresponding power. Thirdly, for a specific enterprise, there exists an optimal size, before it, the size of Board and the company's competitiveness have a positive correlation; after that, they have a negative one. For a Chinese listed company, it should be careful to select this scale, in order to maximize their competitiveness. Fourthly, too frequent board meetings maybe a signal of lower competitiveness. To improve the efficiency of Board meeting, the company should notify directors the conventional information and analysis on key issues in advance, so that directors can prepare for the meeting. And the discussion of the meeting should be concentrated in new decision, strategy and policy, not just the history of performance appraisal. At the same time, apart from listening to management speech, enough time should be used to in-depth discussion. In addition, experience from abroad tells us that it is a wise move to set up Standing Committees under the Board, they can effectively promote the standardization of board activities, and improve the level of Board governance, thus contributing to enhancing enterprise competitiveness.In chapter 7, the paper mainly discusses the relationship between incentive to executives and competitiveness from two aspects as follows:salaries to executives and the share proportion executives holding. Empirical results show that firstly, there truly exists significant positive link between salaries to executives and competitiveness of China's listed companies, listed companies should give full play to the positive effects in an effort to improve their competitiveness. To do so, listed companies should further improve their compensation-performance contract to managers. We think our competitiveness evaluation system can be used as a basis for measuring corporate performance. Secondly, on the share proportion executives holding, the Defensive Effect does not function at this stage of China, which plays a main role is the Consistency Effect. Therefore, listed companies should pay full attention to the management equity incentive compensation, and try to find a rational and effective way to improve it. It is necessary to strengthen legislation, improve laws and regulations, and strengthen the management to equity incentive shares.In chapter 8, based on the theoretical analysis and empirical testing, the paper summarized the whole text, and put forward some policy recommendations on enhancing competitiveness by improving internal governance. Finally, the paper looks forward for the future research.