On The Governance Of State-controlled Listed Companies

Currently, international academic field has conducted a fairlycomprehensive research on corporation governance, most of which is aimedon mature markets. However, there still lacks study of state-controlledlisted companies' corporate governance in transition countries such asChina. The literature on ownership argues that there are somedifferences between the efficiency of public and private ownership dueto the intervention of government. The stated-owned enterprises andstate-controlled listed companies are still popular in developingcountries, even in some developed countries, so it is significant toinvestigate the efficiency of the corporate governance in listedcompanies in China. Today's ownership and governance characteristics oflisted companies in China are largely shaped by the past incentivestructure of the listing process. The government introduced stock marketpartly as a means of reforming the state sector, and thus the companiesthat are listed on China's stock exchanges are mostly state-controlledenterprises. The two important characters of the insider corporategovernance in listed companies in China are the government control ofexerting over companies' behavior and the inner member control.This paper offers an analysis of the inside and outside corporategovernance in the Chinese listed companies which are state-controlledwithin the context of transformation. The motivation for this exerciseis twofold: first, comparative corporate governance analysis has shownthat the conflict that is widely assumed to be at the heart of thegovernance problem, the Principle—Agent conflict between shareholdersand managers is not the relevant conflict in transition economies. The corporate governance problem in transition countries is much morecomplicated than the neoclassic economists have supposed. Thus trying toimprove the poor performance of the listed companies in China is likelyto be a fruitful exercise. Second, the bad corporate governance of thelisted companies, which used to be state-owned enterprises under centralplanning, has become the bottleneck of the further development of theeconomy. Hence, the effort to improve such a situation is also veryurgent.This paper is guided by dialectical materialism and historicalmaterialism, consulting two economic theories, both of which arehyper-property rights theory and Principle-Agent theory. Using themethod combined by standard research and real diagnosis, the paperstudies systematically the problem of corporate governance instate-controlled listed companies in China, and explores the ways andcountermeasures of improvements. The following is the detail:This paper analyzes the problems of both the internal and externalcorporate governance, and offer some means to resolve these problems onthe base of theory and experience in practice. For the externalgovernance, a company must emphasize the function of capital marketmechanism and manager market mechanism. On the other hand, thesupervision of bank and institutional investor can be also a good way.For the external governance, current stimulant mechanism and controlmechanism must be deal with rightly. Additionally, Chinese enterpriseshould try their best to optimize their capital structure in property.And this can decrease administerial effect. At the same time, it canmake enterprise emphasis on market and stock value much more than what they used to do. It is very important to develop market healthily and toattract international capital successfully.