Control, Governance, Environment And Enterprise Value. Group

The Chinese economy is going through a transitional period and the establishment of enterprise groups should not only meet the current but also the long-term needs of the development of the national economy. As the focus in the reform of state-owned enterprises, the enterprise groups in China have had achievements receiving worldwide attention, yet there are still numerous problems hindering their further developments, including the lack of competitiveness, irregularities in operation, low benefits, and irregularities in governance environment, etc. The root cause of these lies in the system, i.e. the imperfections in the corporate governance mechanisms of the state-owned enterprise groups and the influence of factors in governance environment. For the sound development of the state-owned enterprises groups in China, we need to establish and improve the modern enterprise systems, improve the governance environment and standardize the market. When it comes to organizational structure, this means establishing governance mechanisms that meet the demand of market economy.The management of enterprise groups has been a focus issue for scholars at home and abroad. It includes the internal management mechanism (including structure of stockholding) and external management environment (including at least protection of property rights, government management, level of legality, market competition, credit system and the idea of forming contracts, etc). These factors are important to the smooth conclusion and performance of a contract and have an influence on the effectiveness of corporate management and the benefits of the enterprise groups. This paper analyzes the influence that governance mechanism and environment of enterprise groups have on the values of the enterprises. Based on a comprehensive explanation of relevant literature and theories, the paper provides a systematic and insightful analysis of the management of enterprise groups in China at the current transitional period. The analysis focuses on factors such as government control, level of legality and marketing process, etc. The conclusion reached is: the better the management environment is (i.e. the faster marketizaiton is, the less government interference and the higher the legality level is), the higher the corporate value the enterprises possess.After studying relevant literature and theories and establishing the research frame and hypothesis, the author gives a comprehensive analysis of the relationship between the management mechanism and environment of enterprise groups and their corporate values based on the hypothesis test and regression analysis of the initial sample data of 1,323 listed companies between 2003 and 2005.The following conclusion has been reached:the management of enterprise groups is beneficial to the enhancement of their corporate values; the better the governance environment is, the higher the corporate values are; compared to group control, the governance environment of non-group control has more influence on corporate value; The corporate value reaches its peak when group control is combined with good governance environment.