Corporate Governance Mechanisms

This chapter examines empirically the effectiveness of the ownership structure, board structure, and compensation of a sample of Chinese firms over the period from 1997 to 1999. We find that ownership concentration and percentage of employees’ shareholding have positive impacts on firm performance, but the percentage of major officers ’ shareholding does not. The ratio of insider directors is not related to firm performance either. CEO duality has an impact on chairmen’s salaries. However, managerial compensation is, in general, not related to firm performance. Overall, there is only weak evidence supporting the effectiveness of Chinese firms’ internal governance mechanisms.