Principal—Principal Conflict in the Governance of the Chinese Public Corporation

Yiyi Su, Dean Xu and Phillip Phan

Management and Organization Review, 2008, vol. 4, issue 1, 17-38

Abstract: By examining the level of ownership concentration across firms, we determine how principal–principal conflict, defined as the incongruence of ownership goals among shareholder groups in a corporation, impacts agency costs of Chinese boards of directors. Based on data from Chinese companies listed on the Shanghai and Shenzhen stock exchanges during 1999-2003, we found that ownership concentration had a U-shaped relationship with board compensation, board size and the presence of independent directors. These results provide corroborating evidence that principal-principal conflict can lead to high agency costs.

Date: 2008
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