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Two Typical Modes Of Corporate Governance Analysis

Posted on:2004-11-10Degree:MasterType:Thesis
Country:ChinaCandidate:P YuFull Text:PDF
GTID:2206360122461493Subject:Business Administration
Abstract/Summary:PDF Full Text Request
Financial AMCs are obligated to dissolve the Financial risks of commercial banks and to promote the restructuring and renovation of SOEs. Financial AMCs have restructured a number of SOEs by means of debt-to-equity-swap and established modern corporate system for these companies according to the Firm Law and other debt-to-equity-swap regulations. As a state-owned financial AMC, Jinhua AMC has swapped the debts of Jinhua Power Company and other 16 SOEs into equity and thus become the controlling or non-controlling shareholders of these companies. This essay compares and analyses the two typical patterns of corporate governance in the western countries to reach some fundamental conclusions about the basic characteristics and governance method of these two patterns, and applies these conclusions to the corporate governance system that Jinhua AMC designs for Jinhua Power Company. By analyzing the current governance system that Jinhua AMC imposes on Jinhua Power, the essay proposes an improved governance system to guide the governance practice in this case. A sound corporate governance system is vital for the effective operation of modern corporations. The corporations of Western countries have developed a whole set of effective corporate governance structure that warrants even, rational and efficient operation of the corporation. This essay reviews the corporate governance theories and compares the different corporate governance systems in Western countries. The essay argues that among Western countries there are two major corporate governance paradigms due to the difference in equity structure, financial system and legal system, namely, the external governance system, as represented by United States and the internal governance system, as represented by Germany and Japan. The two paradigms differ in severalaspects, including the supervisory mechanism and the incentive mechanism; their effectiveness is also different in practice. However, with the globalization of product market and financial market, such differences are diminishing. With the conclusion drawn from the analysis of the two paradigms, the essay claims that the current weak governance system of Jinhua AMC to Jinhua Power and the undesirable internal control is due to various factors, including the absence of state-owners, the clumsy share structure, the weakening of supervisory mechanism and the lack of incentives. To improve the corporate governance system of Jinhua AMC to Jinhua Power, the essay proposes several measures such as effective incentive for the management and reinforcement of CFO's supervisory functions. Apart from introduction and acknowledgement, the essay has three chapters. The first chapter introduces the concept and implication of corporate governance, which are the theoretical basis of the following analysis; the second chapter analyzes the two typical corporate governance patterns in the western countries, and draws some simple conclusions from the corporate governance practices of American, Japan and German companies; the third chapter examines the current corporate governance system of Jinhua AMC to Jinhua Power and its problems, then proposes possible improvement to the governance system. As financial institutions transformed from state-owned banks, AMCs' status has changed from the debtors of SOEs to shareholders after debt-to-equity swap. For financial AMCs, to govern the debt-to-equity-swap companies is a new task with no precedents to follow. The research in this essay may be of referential value for AMCs in the governance of debt-to-equity-swap companies.
Keywords/Search Tags:Corporate Governance, Debt-to-Equity Swap, Supervisory Mechanism, Incentive Mechanism
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