IDEAS home Printed from https://ideas.repec.org/a/taf/eurjfi/v25y2019i6p524-549.html
   My bibliography  Save this article

Monitoring corporate boards: evidence from China

Author

Listed:
  • Hisham Farag
  • Chris Mallin

Abstract

China’s listed companies have two-tier boards comprising of a supervisory board and a board of directors. The supervisory board has the responsibility to oversee and monitor the board of directors. Similarly, the role of the independent non-executive directors (INEDs) is to advise and monitor directors. In this paper, we investigate the main board structure hypotheses namely the scope of operations, monitoring and negotiation hypotheses for a sample of Chinese Initial Public Offerings floated on both the Shanghai and Shenzhen stock exchanges. Our results provide evidence to support the three hypotheses. Interestingly, we find that the larger the size of the board of directors, the larger the supervisory board size. Moreover, we find that the higher the proportion of INEDs, the smaller the supervisory board size and this implies that INEDs are perhaps a substituting mechanism for the supervisors’ monitoring role. Finally, we argue that as the Chinese governance structure combines both the German and the Anglo-Saxon models, this creates a conflict between the two boards with respect to the monitoring role. Our results, therefore call for a comprehensive reform in the Chinese governance mechanism.

Suggested Citation

  • Hisham Farag & Chris Mallin, 2019. "Monitoring corporate boards: evidence from China," The European Journal of Finance, Taylor & Francis Journals, vol. 25(6), pages 524-549, April.
  • Handle: RePEc:taf:eurjfi:v:25:y:2019:i:6:p:524-549
    DOI: 10.1080/1351847X.2017.1369138
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1351847X.2017.1369138
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/1351847X.2017.1369138?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ahmed Aboud & Ahmed Diab, 2022. "Ownership Characteristics and Financial Performance: Evidence from Chinese Split-Share Structure Reform," Sustainability, MDPI, vol. 14(12), pages 1-18, June.
    2. Bai, Min & Pan, Maomao, 2023. "The economic independence of supervisory boards and corporate innovation: Evidence from China," Economic Modelling, Elsevier, vol. 127(C).
    3. Fabio La Rosa & Sergio Paternostro & Francesca Bernini, 2023. "Corporate and regional governance antecedents of the Legality Rating of private Italian companies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(1), pages 297-329, March.
    4. Amin, Qazi Awais & Cumming, Douglas, 2023. "The politician as a CEO, corporate governance and firm value," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 87(C).
    5. Awais Amin, Qazi & Cumming, Douglas, 2023. "Regulatory reforms, board independence and earnings quality," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 88(C).
    6. García, C. José & Herrero, Begoña, 2022. "Corporate entrepreneurship and governance: Mergers and acquisitions in Europe," Technological Forecasting and Social Change, Elsevier, vol. 182(C).
    7. Paolo Saona & Laura Muro & Pablo San Martín & Carlos Cid, 2020. "Ibero-American corporate ownership and boards of directors: implementation and impact on firm value in Chile and Spain," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 33(1), pages 2138-2170, January.
    8. Lu, Di & Liu, Guanchun & Liu, Yuanyuan, 2022. "Who are better monitors? Comparing styles of supervisory and independent directors," International Review of Financial Analysis, Elsevier, vol. 83(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:eurjfi:v:25:y:2019:i:6:p:524-549. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/REJF20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.