The impact of the ownership structure on corporate governance levels: A study between state-owned and privately-owned banks in China

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Abstract

The banking sector is often considered the backbone, as the credit facilities, also investment functions, are controlled through this sector. China is one of the fastest-growing nations with a robust banking sector. However, several banks in China are owned and governed by the state (Lu, 2016). This has a significant impact on banking operations and performance. This develops the research problem of finding the magnitude of ownership structure’s impact on governance levels. As a result, this would provide substantial insights to the bank management and regulatory authorities. This study aims to analyse the impact of the ownership structure on the governance levels of the banks in China by using data from 42 banks across 13 years. It adopts a quantitative design using the random effects model and cross-sectional time-series feasible generalized least squares (FGLS) (Awan et al., 2020). The findings show that ownership structure significantly impacts the corporate governance ratings of Chinese banks. However, parameters like board member number and environmental, social and governance (ESG) ratings have a negative yet significant impact on Chinese banks’ corporate governance levels. Hence, it has been concluded that state-owned banks exhibit higher governance standards compared to privately-owned banks. This provides policies for duality and regulatory practices on ownership structure guidelines.

Keywords: Corporate Governance, Ownership Structure, China, Random Effects Model, Cross-Sectional Time-Series FGLS

Authors’ individual contribution: Conceptualization — D.F.; Methodology — D.F. and H.I.; Investigation — D.F.; Resources — H.I. and G.C.; Writing — D.F., H.I., and G.C.; Supervision — H.I.; Funding Acquisition — H.I.

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

JEL Classification: G34, G21, C23, M41, O16

Received: 03.12.2024
Revised: 25.03.2025; 05.09.2025
Accepted: 07.10.2025
Published online: 10.10.2025

How to cite this paper: Fan, D., Ibrahim, H., & Chen, G. (2025). The impact of the ownership structure on corporate governance levels: A study between state-owned and privately-owned banks in China. Journal of Governance & Regulation, 14(4), 104–114. https://doi.org/10.22495/jgrv14i4art10