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Title: Role of financial institutions in corporate governance of listed Chinese companies
Author: Yuan, Rongli
ISNI:       0000 0004 2747 4417
Awarding Body: Cardiff University
Current Institution: Cardiff University
Date of Award: 2005
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The primary focus of this thesis centers on the role of Chinese financial institutions in corporate governance of listed companies. In particular, I address the following questions: (1) What are the characteristics of firms that attract institutional investment (2) What are the expected and practical roles of financial institutions in corporate governance (3) What are factors that affect the role of Chinese financial institutions in corporate governance (4) What is the impact of institutional ownership on firm performance (5) How do financial institutions perform their role in practice To answer the first three questions, I interviewed both senior managers of financial institutions and board members of listed companies. The results indicate that most securities companies are passive investors, while a minority of active investment funds help the companies in which they invest to standardise their practices, improve their performance, and establish good images in the secondary securities market. This limited role can be attributed to a number of factors, including highly concentrated ownership structure, segmented share structure, premature regulatory environment, conflicts of interest, inadequate transparency and disclosure of financial information, and agency problems within financial institutions. To answer the fourth question, I use a sample of 1,176 companies (3,273 observations) listed on the Shanghai and Shenzhen stock exchanges over a period from 2001 to 2003 to examine the relationship between institutional ownership and firm performance. I find that: (1) investment funds have a positive impact on firm performance and accounting performance influences their shareholdings (2) the shareholdings of securities companies have no significant impact on firm performance. The results indicate that different financial institutions have differing impacts on firm performance. To answer the fifth question, I focus on a specific case, in which fund managers took an unprecedented collective action to challenge a controversial proposal issued by China Merchants Bank (CMB). Though they ultimately achieved a very limited amount of success, the fund managers never gave up their efforts to fight for the rights of minority shareholders. Their unyielding action demonstrates that financial institutions' role in corporate governance is growing. All in all, Chinese financial institutions (specifically investment funds) seem to have started to play a role in corporate governance and different financial institutions have differing performance effects on listed companies. The findings support the recent regulatory effort to promote financial institutions as a corporate governance mechanism with respect to investment funds, but suggest that further work is needed to enhance the role of securities companies as a monitoring device. The results also highlight that it is important to distinguish different types of financial institutions when examining their effects on firm performance in China. (Abstract shortened by UMI.)
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available