Corporate governance and firm performance in listed companies: Evidence from China

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Abstract

This research examines the relationship between corporate governance and firm performance in listed companies within China’s Greater Bay Area (GBA), analyzing data from the Hang Seng and Shenzhen Component Indices from 2015 to 2021 (Alzubi & Bani-Hani, 2021). A sample of 30 firms from Hong Kong and Shenzhen is investigated, considering corporate governance as the independent variable and return on assets (ROA), return on equity (ROE), and Tobin’s Q as dependent variables. Control variables include firm size, age, board size, and the engagement of an external auditor from the Big Four. Findings reveal a 58 percent governance level in the Hong Kong and Shenzhen exchanges, consistent with prior studies (Buallay et al., 2017). Despite this, the research shows no significant impact of corporate governance on operating and financial performance, and factors such as the largest shareholder’s ownership, board independence, and board size do not significantly influence firm performance. In light of these findings and limitations such as aggregated data and limited sample size, the necessity for further research is underscored.

Keywords: Corporate Governance, Financial Statistics, Firm Performance, China, the Greater Bay Area, Hong Kong, Shenzhen

Authors’ individual contribution: Conceptualization — P.C.W.Y.; Methodology — P.C.W.Y.; Validation — P.C.W.Y. and E.P.; Formal Analysis — P.C.W.Y. and E.P.; Investigation — P.C.W.Y.; Resources — P.C.W.Y. and E.P.; Writing — Original Draft — P.C.W.Y.; Writing — Review & Editing — P.C.W.Y. and E.P.; Visualization — P.C.W.Y. and E.P.; Project Administration — P.C.W.Y. and E.P.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G1, G3, O1

Received: 14.06.2023
Accepted: 16.11.2023
Published online: 20.11.2023

How to cite this paper: Yip, P. C. W., & Pang, E. (2023). Corporate governance and firm performance in listed companies: Evidence from China. Corporate Governance and Sustainability Review, 7(3), 45–57. https://doi.org/10.22495/cgsrv7i3p4