Seminar (Dept. of Accounting)

Theme：Tracing Back to the Source: Understanding the Corporate Governance of Boards of Directors in Chinese SOEs

Speaker：Zhengfei Lu,Professor, Guanghua School of Management, Peking University

Time：2022-06-22 14:00

Address：Online Meeting

Language：Chinese

ABSTRACT:

Based on the relevant theories of corporate governance and the special institutional background of Chinese state-owned enterprises (SOEs), this paper systematically reviews literature on the independence and governance effect of the boards in SOEs. We find that the governance effect of the SOE boards is driven by the dual characters of the SOEs - the state involvement in ownership and the market incentives. SOEs adhere to the leadership of the Communist Party of China (CPC), resulting in positive effects of board governance. Moreover, under the market incentives, SOEs tend to have optimal board structure that helps to mitigate both "shareholder-management agency problem" (Type I agency problem) and "controlling shareholder-minority shareholder agency problem" (Type II agency problem). In terms of the governance effect of the board, the directors appointed by non-controlling shareholders can more effectively alleviate Type I and Type II agency problems, highlighting the importance of mixed-ownership reforms in SOEs. Independent directors, especially those with a professional background, also play a role in improving corporate governance. However, independent directors in SOEs have weaker motivation to supervise, which limits their governance effect. This paper has positive implications for promoting mixed-ownership reforms and improving board governance in SOEs.