The Political Economy Determinant On Institutions Of Chinese Corporate Laws

Whereas the company is embedded into a social network which constituted by political, economic, cultural etc. dimensions, the company is therefore an endogenous institutions of the embedded institutional context. The institutional designs work on corporate laws, provided disregarding said institutional context and related institutional transition theory, will result in plausible however undesirable conclusions. The technology-oriented nature of corporate laws rendered the research be apt to focus on technical details of the law, which may cause the researcher to ignore the big picture of institutional context the law embedded, thus povertize the study of corporate laws. To complement the institutional rationality and enhance the institutional performance of the corporate laws, such will necessitates a research perspective that covers said realm, and effectively reflect the complicated interaction between the company and the social relationships network it embedded.This dissertation commences its discussion from the contractual theory on corporate laws, demonstrates that either property rights or contractual theory of economics both premised on certain political foundations: a political state defines the ownership of property rights, and the political governance delimits the realm of contracts and its efficiency of performance. Spontaneous order which functions in a lawless manner is not prevailing in modern society. The formal norms of modern market economy are defined and enforced by political regime, therefore political regime is of essence on determing economic performance. Laws originated from political arena delimit the rules of corporate contracts, market institutions also framed in related political process, constraints imposed by politics on economy is as real as the technology does on economy. Premises considered, besides the contractual theory on corporate laws which emphasized on economic analysis, furtherance of the foundation of theory on corporate law also requires a paradigm engages the political economy approach. With such in mind, the primary issue of the dissertation presented: how could the Chinese corporate laws, which embedded into a transitional context be interpreted by political economy approach?The overarching logic clues are as following: the instutions of Chinese corporate laws are embedded into the political economy context, while the socialism institution is the cornerstone of the system(the "meta-system"), therefore a normative construct which modeling the political economy of the Chinese-featured socialism is the basis of ensuing discussion. This normative model frames most aspects on institutional supply, transition and performance in actual function of Chinese corporate laws, which lead to following logic and arrangements of the dissertation:Chapter 1 is the overarching statement of the theory, it presents the political economy model of the socialism system(a trinity model composed by political structure-ownership forms-ideology, and coordinated/administered by bureaucrats), and the political structure is the determinant of the entire system which originates ownership structure and ideology and serves as the foundation of the trinity model: political structure and ideology determine each other as reciprocal causation, political structure defines certain forms of public-owned propery rights, said three elements necessitate each other. In the context of transition on said trinity system. China and Russia initiated their respective transition in a similar starting and engaged similar technical measures, however their orientation of transitions deviates since the differentiated political constraints(and related ideological impacts) shaped the ownership structure of company and corporate governance respectively, thus lead to three analytical clues of the dissertation: the ownership structure of the company, the internal governance structure of the company, and the origination and associated transition of corporate laws. Ownership and the origination/transition of corporate laws are closely related to political structure, and the bureaucrats-dominated coordination mechanism is closely related to internal governancne system. Issues on Ideology are diffused and integrated into remaining chapters hereof for a specific amplification.The second chapter studies the history of changes in the Chinese corporate laws. This chapter is not a simple descriptive chronicle, but trying theorize the dynamics of Chinese corporate laws. The traditional paradigm of rational choice theory on Institutional change is not sufficient for the modeling of complex historical issues, so the author attempts engaging a political economy research tool(“Analytic Narratives”) to remedy the "anti-historical" tendency of traditional rational choice theory, in the specific historical rational choice theory test event in general conclusion, based on historical facts and hypotheses and conclusions on the premise of rational choice to be amended. And following conclusions revealed:( a) the major reform policies and the evolution of corporate laws are positively and highly correlated;(b) the standard rational choice pattern the central government constantly employed on revising corporate laws, is the stability, controllability and ideological legitimacy. SOE reforms is consistently the concerns and focus of the evolution of corporate laws.(c) the ownership structure( "Who owns the company") and controlling structure( "who control, and how to control or manage the Company") are the gists of a company’s participants’ interests, therefore constitute the core of corporate laws. Political struggle thus launched around these issues are of the most intensity and particularly evident in the state-owned enterprise reform agenda. The membership from "emerging and transitional" features expanded capital markets, market-oriented approach to the political game of expression, is to observe the company’s legal system and political process of shaping the window. Further proposed three contradictions of political economy determines the path of the Chinese company changes the legal system :( a) ideological contradictions;(b) the state-owned and non-public economic contradictions. Close contact with the first pair of contradictions;(c) the central- local conflicts. Therefore, political factors shaping the evolution of direct development of the company’s legal system. The political game demonstrated by marketized measures and unfolded via “emerging and transitional” –featured capital market, is an oberserving window for formulating process of corporate laws. It is also presented that there political economy contradictions are the determinants to the eveloving path of Chinese corporate laws:Chapter 3 studies the legislative aspects of Chinese corporate law. This chapter aims to answer the issue that "how the corporate law was created by the national legislation". Most previous studies corporate law regarded the legislative process as a "black box", but in fact the black box in the legislative process is a very complex operation, multi-dimensional nature of the relationship included; the legislative process is a political process in a certain sense, the product of legislative politics. Therefore, the process of legislation and legislative enactments pattern is associated with the country’s operating manner of political power during operation linked to supply research firm legal system it is unreasonable to ignore the political sphere generate legal system.This chapter is based on China’s current legislative program and the process of combing, Comparative Analysis of several theoretical models of political decision-making in the legislative process, the type of structure "Pressure- Feedback" circulating legislative and political decision-making model, pointing out that the results of the Company Law depends on three key aspects of the legislation : First, the reform of the CPC Central Committee how to interpret the contradictory political issues to be resolved in this, the system can change the company to become one of the options to resolve conflicts; two, the organization drafted by the draft legislation on how to attract corporate law, balance the views of the parties and perspectives, forming relevant draft platform; three, the central leadership for legislative attention and perspectives on how to draft a platform for the final program can(and how) to form a more consistent resolutions. However, these three aspects are confusing but relatively secretive political process.The fourth chapter is the empirical research of this dissertation. Traditional theory on the quality of corporate law holds that: the improvement of the quality of corporate law(technical improvements that alleviate the there pairs of agency problems, for example, the shareholder representative lawsuit mechanism to mediate insider control) and raise the level of corporate law for the protection of judicial decentralized minority shareholders within the company and major shareholders to avoid the use of dominance against their interests, thereby promoting ownership diversification, expanding social investment, the formation of an active capital market in order to promote economic development. While social democracy, "left- right" wing political factors induced by the agency cost problem may be equally important reason for the decision whether decentralized corporate ownership. Based on the Chinese context and developed the theory test, preliminary evidence of the ownership structure of Chinese companies have their political base, and the main mechanism of action is not based on political influence on agency costs "shareholders- employees-business management" agency chain thus indirectly shape the ownership structure, but a direct role in the decision.By multivariate regression testing to prove improve the quality of China’s corporate law indeed is likely to promote the company’s ownership structure of decentralization, which findings law and finance theory coincides, in part, to prove the applicability of the China Law quality theory.Secondly, in the context of China’s transformation, an indirect measure of the degree of deviation from the classical system of political variables between corporate ownership structure and significantly related to provincial political structure closer to the classical system, the higher the concentration of ownership of listed companies in the province level. The empirical results confirm the general part of the qualitative analysis conclusion of socialist political economy model.Again, the results of empirical evidence: political constraints for equity firm focused on the impact of the change in mass far more influence corporate law for the strong intensity. It shows again that in the transition countries such as China, although the market system has been established, but the mechanism of the market system is running with the Western context classic mode has an important difference: it is still subject to strong constraints and control political basis. This conclusion is also consistent with the qualitative analysis in accordance with the conclusions of the socialist political economy model. In order to develop a political theory of corporate governance.Conclusions of this study for the reform of state-owned enterprises of mixed ownership has certain practical significance: only good law is not sufficient to guarantee the success of mixed ownership reform, various reform initiatives may not reach the technical crux of the problem, the core essence of the problem is a political issue on mixed ownership reform, political reform to decide the extent of deviation from the classical model of socialist political and economic system, including the company also determines the form of ownership, including property like state. Follow the logic of the market, such as corporate law reform to build, although a significant role, but ultimately hard to reach "system hard core" of the essence. Therefore, political reform is critical to the success of mixed ownership reform is possible. Without political reform package and support while adhering to rely solely on the technical means to promote market-oriented reform of mixed ownership, "Trinity" classic system is bound to hinder the effectiveness of the reform stubbornly. Mixed ownership reform therefore need to examine further the political dimension of the redesign.Fifth chapter discusses bureaucratic administrative coordination mechanism for the company’s legal system relies on market mechanisms designed alienation. Because of the socialist political economy model bureaucratic administrative coordination mechanisms and market-led spontaneous coordination mechanisms exist, bureaucracy might alienation internal corporate governance structure designed by the company’s legal system, the legal system is also likely to play a governance performance of companies dependent on serve in the products, control, manager market mechanism is virtual home.First, by analyzing the history since ancient times, the company pointed out that China’s bureaucracy is the path of the shadow of Chinese companies already rely on the system.In the independent directors after bureaucratic analysis by empirical proof: a government official background of independent directors( "official independent director") for the listed company insiders may be less than the appropriate supervision and supervision of non-independent director of officials. This shows that it is unlikely to achieve the official independent director oversight purposes set of independent directors is seeking legal system; and the role of independent directors and officers of listed companies may be relatively more consistent with the role of the independent directors of resource dependence theory. The empirical results combined with the fact that after the ban on the introduction of the Central Organization Department officials regulate independent director resignation tide, more subtle explanation of the problem.Manager Market Law grants manager hypothesis is almost a "blank check" great powers theoretical basis. The hypothesis that the market mechanism itself managers can effectively reduce the manager’s opportunistic behavior, controlling agency costs. The core of the market mechanism is the price, so the executive compensation at the core of the company’s internal governance, executive compensation plays an incentive because the configuration function between managers and shareholders. So executive pay at the core of the company’s internal governance, the Board of Directors elected and dismissed except for company executives, the most important duty is to set executive pay. However, state-owned enterprises, this market hypothesis needs to be established quite questionable to what extent.In the state-owned enterprise executives "salary limit order" to discuss with the jurisprudence of the affair, noting the presence of their degree of development of serious deficiencies; lack of bargaining power, easy to be controlled by others; restrict executive pay incentives are not sufficient, making it difficult and executives on the board of state-owned enterprises reached a fair trade salary. Shareholders seeking direct intervention or judicial intervention is also not a workable option. Therefore, in a semi-state-owned executive pay in fact out of control, internal and external governance mechanisms companies have reported failures, corporate law can do nothing. So let ’salary limit order "administrative intervention and the discipline of the" restless hand "was a march of legitimacy. This dilemma of profound contradictions among the crux of the paradox is worth considering.Similar conflicts are also reflected in the employment of state-owned enterprise executives. Law set "shareholders the appointment and removal of directors hired-the appointment and removal of directors hired executives," the agency chains in the state-owned enterprises to some extent, is the virtual home of the replaced party official appointment system is under the control of the Party Administrators Principles(Nomenclature). Despite the party’s official appointment system expands the choices Board of hiring executives played a strengthening of external exchanges, the introduction of the role of external talent. Meanwhile strict discipline within the organization and comprehensive monitoring capabilities, to some extent, also played a supervisory board oversight effect can not be achieved. Nevertheless party official appointment system for the supervision and management executives realized, at least can not do better than the board of directors.Analysis of the company’s internal governance structure of bureaucratic alienation proof: the process of economic transition and is a political process, the political process is the political elite interest groups through the game and "vote" in particular in the political system of the decision, but their game and vote The end result is likely to be in favor of a political elite market structure, thus consciously organized market structure, distribution of economic benefits bound to benefit the political elite(for example, political power will be honored as the economic capital).The implementation of the basic system of socialism with human and social development of all hitherto existing social system unparalleled advantage. Therefore, the socialist system is fully capable of existing in the political architecture absorption, utilization, and the role of the corporate system, and unnecessary to go literally to go backwards on the company "match" of the so-called separation of powers and other Western democratic model astray crooked road, but it also does not prevent us from fully understanding the common law of development of human society on the basis of the political structure in a reasonable absorption system can really play a role in promoting the company’s institutional arrangements, so that the issue of corporate governance in China too strong The political logic of giving way to more market logic, enabling the company to build the legal system in accordance with the logic of the market can be completely internalized in all aspects of the company’s operations, which are more fully and effectively play the governance performance. Just from the "market-oriented" quality level company statute itself, the legal system, the Chinese company’s legal system itself has a relatively advanced corporate law, to the West to learn from, the advantage is not already transplantation; therefore, to further Law played governance performance potential, the prospects of reform is not simply a technical change, the fundamental strategy is to meet political reform. To adhere to the Communist Party of China under the leadership of the overall premise, and actively promote political reform and orderly, and actively carry out inner-party democracy, and actively build a diversified and integrated mechanism for expressing interest in the party to promote decentralized company ownership; Party Democracy for restrict the power to eliminate, shielding bureaucratic coordination mechanism for excessive penetration of the company’s activities in order to promote the sustainable development of democracy within the party of socialist democracy and socialist constitutional government, and ultimately promote the successful transformation of the political structure of the system to completely get rid of the classic socialist system shackles, thereby achieving coordinated with the corporate system.This may reflect on the significance of the system itself is not limited to the company. The company is the core of micro-institutional system of modern market economy system, small in the big, if the ingenuity of the Office of the Chinese economic reform in the first three decades of the overall design idea is that "political issues, economic solve"; then reform into the deep water area, already in a very different time and space orientation of the moment when the starting times have changed the law changed, the times are calling for politicians to design, implement political system to reduce transaction costs, in order to develop an adaptive system architecture thus emerged induced similarly reduced transaction costs, including the company’s system, including a variety of economic systems and improve the efficiency of the changes. Reform should have come along, Comrade Deng Xiaoping pointed out, "economic problems, political solution," the new path once again turning point of departure.