Corporate Governance and Market Valuation in China

Chong-En Bai, Qiao Liu (), Joe Lu (), Frank Song and Junxi Zhang ()

William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: This paper studies the relationship between the governance mechanisms and the market valuation of publicly listed firms in China empirically. We construct measures for corporate governance mechanisms and measures of market valuation for all publicly listed firms on the two stock markets in China by using data from the firm’s annual reports. We then investigate how the market-valuation variables are affected by the corporate governance variables while controlling for a number of factors commonly considered in market valuation analysis. A corporate governance index is also constructed to summarize the information contained in the corporate governance variables. The index is found to have statistically and economically significant effect on market valuation. The analysis indicates that investors pay a significant premium for well-governed firms in China, benefiting firms that improve their governance mechanisms.

Keywords: Corporate governance mechanisms; market valuation; corporate governance index; corporate governance premium (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2003-06-20
New Economics Papers: this item is included in nep-cfn, nep-fin, nep-sea and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Journal Article: Corporate governance and market valuation in China (2004)
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