The optimum Corporate Governance for Chinese Company
（网络范文，仅供参考）
Content page
1.0 Introduction. 3
2.0 Background. 4
2.1 The research question. 5
2.2 Goal and Aims of the research. 5
2.3 The way to achieve aims and reach the goal 5
3.0 Literature Reviews 8
4.0 Dissertation Structure. 11
5.0 Methodology. 12
6.0 Conclusion. 13
Reference. 14
1.0 Introduction
The purpose for this report is to provide a research proposal regarding to “The Optimum Corporate Governance for Chinese Company”. Firstly the report provides a background for the research, states the current Corporate Governance problems that exist in Chinese companies. Base on the problem statement, the research question can be decided. In order to answer the research question, there are research goal and arms need to achieve. The report specifies the ways to achieve research arms and research goal, provides an understanding of how to accomplish this research. Brief history review of corporate governance is given in order to have perception of the concept. The structure of the whole dissertation compose is also provide. Finally this report describes the research methodology for the research.
2.0 Background
In the 20 century, the economical development in the west developed countries has been successfully achieved. There are two factors. One is the development of the science technique. The other one is the reformation of organization method in economical action. After entering 21st century, China is trying to do economical system reformation in order to develop and improve the Chinese market economic building. The target of economical system reformation is to build modern corporate system reformation. In the modern corporate system, companies which are the representative of modern corporate system play more and more important role. With the separation of ownership and operation it is necessary to have a corporate governance problem. Corporate governance not only has become important problems of modern corporate system, but also is the way to strength the competition power and to improve operation. The produce factors reorganize in global scope and the competition becomes stronger and stronger. The countries’ development depends on the corporate development. Perfect corporate governance not only is the key of corporate living and developing, but also is connected with overall economical power. Perfect corporate governance brings the right encouraging system to directors and managing and makes more efficient use of the resource. Especially, China had entered the WTO, and all companies have to face the international competition. However, the corporate governance in China is half-baked. In many cases, key managers gain control over the shareholders’ general meeting which means most of decisions is directly made by the senior managers in their interests. Because of this governance structure, a string of corporate scandals has emerged. In order to have a health environment for companies, the Chinese corporate governance is needed to reform in urgent.
2.1 The research question
What is the appropriate corporate governance for the contemporary Chinese corporations?
2.2 Goal and Aims of the research
The goal for this study is to analyze the corporate governance in China and investigate the appropriate corporate governance in outstanding Companies.
The aims of the research were to:
l Understand the concept of the corporate governance
l Examine best current corporate governance in the world
l Collect data and analyzing specific case of Chinese corporations, find out the corporate governance they use and which approach they use most
l Find out governance issues in China and address the difficulty to adopt current best corporate governance in China
l Formulate a set of appropriate corporate governance for a particular Chinese corporation
l Analyze and discuss problems
2.3 The way to achieve aims and reach the goal
The reason that the corporate governance becomes the researching hot is that the different corporate governance structure will influence the operation efficiency and achievement. In the process of the Chinese corporate reformation people realize that the core approach of building modern corporate system is to build scientific, efficient and perfect corporate governance system. Many companies’ scandals are shown in recent year. This means that the Chinese corporate governance has many problems. The corporate governance problems have some factual and theoretical meaning. While Chinese companies, especially the SOEs, acquire a huge amount of capital from the public through either the banking system or the capital market, they remain extremely inefficient. For example, recent official statistics suggest that about one-third of all SOEs are loss-makers, another third either break even or are plagued with implicit losses, while the remaining one-third are marginally profitable. Ineffective governance system has been widely believed as the root cause of corporate China's lackluster performance. Improving corporate governance is one of the most important tasks of China’s further reform. So, Chinese company should build a perfect corporate governance system.
It is a large impulse for the Chinese corporate system’s development to build perfect corporate governance. At the moment Chinese companies do not build modern and efficient corporate governance system. In the exercise of corporate governance there are a lot of problems, such as the unreasonable of shareholders structure, not enough supervision, and imperfect law environment etc. We should attract and reference the foreign experience to build a set of feasible corporate governance system in order to make corporate governance have some organization and system guarantee.
Why do managers such concern about corporate governance? The answer is that corporate governance practice has a positive effect on its market value, and two conditions need to be satisfied. The first is that good governance increases the returns to shareholders of the firm and the second is that the stock market is sufficiently efficient so that the share prices reflect the fundamental values. These conditions are most likely to be valid in mature markets, but it is by no means clear they are also valid in emerging markets. In fact, many people believe that share prices on China’s stock markets are purely driven by speculative activities and bear no relationship to the fundamentals of the firms. So we should compare the practice in the Chinese country with other countries.
This research tries to make use of comparison and analysis of corporate governance system to discourse the meaning of modern corporate governance, and to discuss factors which influence the corporate governance system. It is useful to know and control new development trend of corporate governance, to improve the efficiency of corporate governance in order to take some advices to perfect and extend the Chinese standpoint.
From the history and actuality of corporate governance system development, corporate governance has different model in different ages and countries. Their relationship and difference is useful to control and corporate governance system and attract some experience.
In order to find out the optimum corporate governance for Chinese companies, we should analyze current corporate governance systems. At the same time we should examine the present problems and future trends of corporate governance and arrange to reform and create the present system according to China’s fact. So, I will have a long and stable corporate governance system.
This article focuses on microcosmic system of the corporate law. It needs to take many comparison and analysis, including the level comparison of corporate governance system during different countries and the analysis from general theory to material methods and actuality. At last, it is going to use theories and actual method to give some personal advices to improve and perfect the Chinese corporate governance system.
First is system analysis method. Corporate governance is a kind of system arrangement. Different corporate governance system represents different system arrangement. System arrangement has cost. People make choice in different system arrangement. In fact people compare different system arrangement to find best one. It is important content of corporate governance research to find best system arrangement in environment changing. It is the application of system arrangement method in corporate governance research.
Second is multi-cases analysis method. This article analyzed the main problems of different Chinese corporate governances. By comparison, we get and discourse the difference and sameness to make clear the corporate governances.
Third is theoretical analysis method. This part analyzes the present problems of the Chinese corporate governance by theory and previous studies. In this part, the barriers of Chinese companies adopting best corporate governance system will be addressed. At last, we find the best method which is fit to China’s fact and get the general system.
3.0 Literature Reviews
History Review
Corporate governance mechanisms are economic and legal institutions shaped by socioeconomic factors as well as political activities. They include factors such as the strategic design of executive compensation and tenure contracts, ownership structure and the composition of the board of directors, CEO duality, the market for corporate control, and disclosure requirements imposed by regulatory authorities (Hitt et al., 1996; Shleifer and Vishny, 1997; Chatterjee and Harrison, 2001). By convention, these designs often are classified as internal and external mechanisms (Hopt et al., 1998; Keasey et al., 1999).
The past decade has seen a surge of interest in formerly planned economies such as Russia, Eastern European countries and more importantly China. Many of the firms in these countries have adopted corporate structures that resemble western business corporations, though with specific features inherited from a socialist background (Nolan, 1996; Dyck, 1997; Huang and Song, 2005
]). Since these firms are operating in a context that is different from a mature market economy, certain current findings about the effectiveness of governance mechanisms may not apply (Hoskisson et al., 2000; Tian and Lau, 2001; Wright et al., 2005).
One important corporate governance mechanism rests on the ownership structure of a firm, which includes factors such as ownership concentration. When it comes to disciplining non-performing top executives, it is suggested that a firm's internal governance structure has a strong influence (Harrison et al., 1988; Boeker, 1992). For example, there is a stronger association between top executive turnover and prior performance for companies with outsider-dominated boards than for companies with insider-dominated boards (Conyon and Peck, 1998; Farrell and Whidbee, 2000). Furthermore, the percentage of shares held by top management has an effect on the probability of executive turnover and succession (Boeker and Goodstein, 1993; Denis and Sarin, 1999; Shen and Cannella, 2002). As such, the accountability of top management can be significantly affected by top management's influence, in addition to the governance structure.
With the first capital-raising goal having been fulfilled successfully through the stock exchanges, more and more attention has been given to the second goal of setting up the financial markets in China—improving the corporate governance of State Owned Enterprises (SOEs). Research on corporate governance in the Chinese financial markets has started to appear and focus has been given to the following areas.
First, what are the major features of the corporate governance of listed companies in the Chinese financial markets? The major special feature of the corporate governance of Chinese listed companies is the segmentation of the ownership. Qiang (2003) documents that from the beginning of the reform to restructure Chinese SOEs into PLCs, the concern of losing state assets and government control led to the ownership being split into three major types (Qiang, Q, 2003) A typical listed company in China has a mixed ownership structure with three predominant groups of shareholders—the state, legal persons (institutions), and individuals, with each holding about 30 percent of the stock. As mentioned in Xu and Wang (1999), the ownership in the Chinese PLCs is also heavily concentrated: the five largest shareholders accounted for 58 percent of the outstanding shares in 1995, compared with 33 percent in Japan (Xu L, 2004).
Second, has the Share Issue Privatisation (SIP) improved the value of firms and what is the relationship between ownership structure, corporate governance and firm value? Xu and Wang (1999) is one of the earliest studies on this topic. They investigate whether ownership structure affects the performance of PLCs in China within the framework of corporate governance and find that there is a positive and significant correlation between ownership concentration and profitability. Sun and Tong (2003) explore the extent of the success of China’s SIP by studying the performance changes of 634 SOEs listed on China’s two stock exchanges from 1994 to 1998. They find that SIP is successful in improving SOEs’ earnings ability, real sales and workers’ productivity, but is not effective in improving profit returns and leverage (Sun, Q., 2003).
From the previous studies, we can see that although privatization was a positive step for the Chinese government to take during the economic reform, the performance improvement of SIP in the Chinese financial markets is not very clear and the corporate governance of Chinese PLCs after restructuring is still not mature. The main reason for this is the complex ownership structure of Chinese PLCs and the conflict of interest between different groups of shareholders.
4.0 Dissertation Structure
This article is composed by introduction, text and conclusion. The text is composed by four parts.
The first chapter explains and analyzes formation and development of corporate governance problems from the general frame. And we have analyzed the definition, classification, characteristic, operation, core and target.
The second chapter introduces the basic theory of corporate governance. And we introduce the importance of corporate governance from the angel of the right separation and supervision system, utilitarianism and merit risk and minimizing agent cost. At the same time we introduce the related theory of corporate governance. It makes good base for the two chapters’ letter.
The third chapter introduces the content of internal and external corporate governance system and summarizes the present situation of world countries’ corporate governance. And then, according to de present situation of other countries’ corporate governance, we conclude the development trend of corporate governance and find out the best current corporate governance system in order to bring experience for the Chinese corporate governance.
The forth chapter is the emphasis. By adopting the case study, the Chinese corporate governance system will be analyzed. Furthermore, we will introduce the present situation of corporate governance and summarize the present problems of the Chinese corporate governance problems. Comparing the Chinese corporate governance with the best corporate governance in theory, the barriers of Chinese corporate governance will be addressed. Finally, the right suggestion for the Chinese corporate governance will find out at the base of material situation of China.
The frame is as following.
5.0 Methodology
This study has been designed into an inductive research. The root of this research is the target question: What is the appropriate corporate governance for the contemporary Chinese corporations? The main body of the research is constructed by case studies. The remaining of the research is then inducted from the findings of the case studies. They are results of the critical analysis of the cases on a corporate governance perspective.
Case studies consist of the core of this study. Multiple cases are introduced to increase the validity of the research and secondary researches are the method of collecting data. Further analysis is constructed based on the information gathered from the information and some well-known business models are used to discuss the formulating. After the strategy has been formed, a critical review has been performed.
Case study is a method for researches that involve an empirical investigation of a particular contemporary phenomenon within its real life context using multiple sources of evidence (Robson, 2002). Case study has been well used in both inductive and deductive research methods. Under an inductive perspective, case study is a useful means of extending general or similar theories into a practical branch addressing specified group context, which are represented by selected sample cases. By exploring the cases, important variables can be discovered in a specific context (Yin, 1994; Marshall and Rossman, 1995; Cayave, 1996; Denscombe, 1998) and their relationship towards the general theory background can be revealed. An improved understanding on the uniqueness of the represented research context can be built up relating to their organisational context.
However, the generalizations from case study may not be reliable. How much representative the selected cases are can be debatable. While constructing case studies, it has to be acknowledged that a considerable risk of error exists when it applies to other cases (Murray Thomas, 2003). Galliers (1991) argues that this risk is the result of lacking significant statistics.
In order to compose a robust case study, the use of multiple cases can be introduced. According to Yin (1994), multiple or comparative cases could increase the reliability of the study, through which a better understanding on the characteristics of Chinese corporate governance can be built. Multiple cases are feasible in this research because corporate governance might vary in different companies, therefore a thorough study can be done in relative shorter time length comparing to large firm study that are mostly single case. This approach helps to explore the true similarity and contrasting situations of Chinese corporate governance represented by the cases, which is fundamental to build up optimal corporate governance for their business.
6.0 Conclusion
The purpose for this report is to provide a research proposal regarding to the research of “The Optimum Corporate Governance for Chinese Company”. Firstly the report provided a background for the research, found out the current Corporate Governance problems that exist in Chinese companies. In order to deeply investigate the problems that Chinese corporations are facing and provide the recommendations for Chinese corporations. The research question is decided to find out the appropriate corporate governance for the contemporary Chinese corporations. In order to accomplish the research question, there are the research goal and arms need to achieve. Thus the report indicates the ways to achieve research arms and research goal, provides an understanding of how to carry out this research. Brief history review of corporate governance is given in order to have perception of the concept. The structure of how the writing of dissertation carries out is also provided. Finally this report describes the research methodology for the research.
7.0 Reference
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