Corporate governance and firm efficiency : evidence from China's publicly listed firms
Document Type
Journal article
Source Publication
Managerial and Decision Economics
Publication Date
4-1-2009
Volume
30
Issue
3
First Page
193
Last Page
209
Abstract
This paper applies a two-stage, double bootstrapping data envelope analysis approach to investigate whether and to what extent various distinctive corporate governance practices affect productive efficiency in a sample of 461 publicly listed manufacturing firms in China between 1999 and 2002. We find that firm efficiency is negatively related to state ownership while positively related to public and employee share ownership. In addition, the relationship between ownership concentration and firm efficiency is U-shaped, indicating the presence of tunneling activities by the largest shareholder. Among three types of controlling shareholder, state exerts the most negative impact on firm efficiency, followed by state-owned legal entities. These results provide strong evidence that political interferences have reduced firm efficiency. It shows that the proportion of outside directors and the number of board meetings are positively associated with firm efficiency, suggesting that board of directors can be an effective internal governance mechanism. Furthermore, provincial market development, a proxy for the strength of external governance mechanism, is positively related to firm efficiency. Overall, our findings illustrate that restructuring state-owned enterprises via improvements in corporate governance has enhanced firm efficiency, but partial privatization without transfer of ownership and control from the state to the public remains a major source of inefficiency in corporate China.
DOI
10.1002/mde.1447
Print ISSN
01436570
Publisher Statement
Copyright © 2008 John Wiley & Sons, Ltd. Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Lin, C., Ma, Y., & Su, D. (2009). Corporate governance and firm efficiency: Evidence from China's publicly listed firms. Managerial and Decision Economics, 30(3), 193-209. doi: 10.1002/mde.1447