GOVERNANCE AND PERFORMANCE IN COMPLIANCE VERSUS NON-COMPLIANCE CHINESE LISTED COMPANIES

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Abstract

Cases of corporate scandals and the misconduct of publicly listed companies (PLCs) are growing amid rapid economic development in China. Systematic research on governance factors affecting these corporate misconducts and their consequences is however scant. This study compares the key governance characteristics of Chinese PLCs that were found to have contravened regulatory compliance requirements (i.e., “non-compliance” PLCs) to those that were not (i.e., “compliance” PLCs). Based on a comparison between 53 pairs of compliance - and non-compliance-PLCs over the period from 2001 to 2006, our results show that there are significant differences between the two. We found that ownership concentration is higher in compliance firms that also compensate their directors and executives at higher levels. Furthermore, the results suggest that sound governance practices benefit firms socially and financially, and an effective internal monitoring mechanism can further differentiate good companies from bad companies such that the good companies perform better.

Keywords: corporate governance, regulatory compliance, ownership structure, compensation, China

How to cite this paper: Tam, O. K., Tan, M. G.-S., & Hu, H. W. (2010). Governance and performance in compliance versus non-compliance Chinese listed companies. Corporate Board: role, duties and composition, 6(3), 31-41. https://doi.org/10.22495/cbv6i3art3